The importance of deposit insurance credibility

Detalhes bibliográficos
Autor(a) principal: Bonfim, Diana
Data de Publicação: 2023
Outros Autores: Santos, João A.C.
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10400.14/41875
Resumo: Sovereigns usually back up their deposit insurance arrangements to lend them credibility. When the sovereign is in distress, the credibility of deposit insurance might be threatened, with detrimental effects to financial stability. We investigate the behavior of depositors during the euro area sovereign debt crisis to understand the importance of deposit insurance credibility. We find that depositors responded to foreign banks’ decision to convert their subsidiaries into branches. By relocating their deposits into these newly formed branches during a period of sovereign distress, depositors became insured by a deposit insurance scheme with a stronger fiscal backstop. These results document a novel channel through which sovereign-bank links can be reinforced during a crisis: the credibility of deposit insurance.
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spelling The importance of deposit insurance credibilityBank depositsBank runsDeposit insuranceMarket disciplineSovereigns usually back up their deposit insurance arrangements to lend them credibility. When the sovereign is in distress, the credibility of deposit insurance might be threatened, with detrimental effects to financial stability. We investigate the behavior of depositors during the euro area sovereign debt crisis to understand the importance of deposit insurance credibility. We find that depositors responded to foreign banks’ decision to convert their subsidiaries into branches. By relocating their deposits into these newly formed branches during a period of sovereign distress, depositors became insured by a deposit insurance scheme with a stronger fiscal backstop. These results document a novel channel through which sovereign-bank links can be reinforced during a crisis: the credibility of deposit insurance.Veritati - Repositório Institucional da Universidade Católica PortuguesaBonfim, DianaSantos, João A.C.2023-07-25T13:28:26Z2023-092023-09-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.14/41875eng0378-426610.1016/j.jbankfin.2023.10691685164719951001050052800001info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-09-05T01:38:32Zoai:repositorio.ucp.pt:10400.14/41875Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T20:10:16.554859Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv The importance of deposit insurance credibility
title The importance of deposit insurance credibility
spellingShingle The importance of deposit insurance credibility
Bonfim, Diana
Bank deposits
Bank runs
Deposit insurance
Market discipline
title_short The importance of deposit insurance credibility
title_full The importance of deposit insurance credibility
title_fullStr The importance of deposit insurance credibility
title_full_unstemmed The importance of deposit insurance credibility
title_sort The importance of deposit insurance credibility
author Bonfim, Diana
author_facet Bonfim, Diana
Santos, João A.C.
author_role author
author2 Santos, João A.C.
author2_role author
dc.contributor.none.fl_str_mv Veritati - Repositório Institucional da Universidade Católica Portuguesa
dc.contributor.author.fl_str_mv Bonfim, Diana
Santos, João A.C.
dc.subject.por.fl_str_mv Bank deposits
Bank runs
Deposit insurance
Market discipline
topic Bank deposits
Bank runs
Deposit insurance
Market discipline
description Sovereigns usually back up their deposit insurance arrangements to lend them credibility. When the sovereign is in distress, the credibility of deposit insurance might be threatened, with detrimental effects to financial stability. We investigate the behavior of depositors during the euro area sovereign debt crisis to understand the importance of deposit insurance credibility. We find that depositors responded to foreign banks’ decision to convert their subsidiaries into branches. By relocating their deposits into these newly formed branches during a period of sovereign distress, depositors became insured by a deposit insurance scheme with a stronger fiscal backstop. These results document a novel channel through which sovereign-bank links can be reinforced during a crisis: the credibility of deposit insurance.
publishDate 2023
dc.date.none.fl_str_mv 2023-07-25T13:28:26Z
2023-09
2023-09-01T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10400.14/41875
url http://hdl.handle.net/10400.14/41875
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv 0378-4266
10.1016/j.jbankfin.2023.106916
85164719951
001050052800001
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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institution RCAAP
reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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