Download This PaperDeposit Protection in a Paternalistic State: The Russian Case
Terra Economicus 18 (1), 28–42, 2020. DOI: 10.18522/2073-6606-2020-18-1-28-42
15 Pages Posted: 22 Apr 2020 Last revised: 23 Apr 2020
Date Written: January 15, 2020
Abstract
This paper places the institution of bank deposit protection in the context of government paternalism. I apply the theories of deposit insurance, merit goods, patronized goods, government paternalism, and institutional change to the analysis of the Russian case. I rely on statistical data from Central Bank of Russia, Deposit Insurance Agency, and Rosstat. The findings are five-fold: (1) There is similarity between theoretical justification for government paternalism and intervention in household savings and the humanitarian sphere; (2) Deposit protection fits well the Russian institutional setup, due to its paternalistic nature; (3) The public choice-driven purpose of government intervention in household savings may change in the process. Patronage of small savers becomes camouflage for protection of private banks; (4) Deposit guarantee redistributes wealth from the public sector to the private one; (5) Deposit guarantee hinders the evolution of market discipline and responsibility while fostering opportunistic behavior patterns among depositors and banks. The research implication of the paper is that, in the absence of strict eligibility criteria for merit goods, one can identify goods and services that probably do not belong there but sneak into that category by means of a manipulated public choice and thus get similar treatment with traditional humanitarian sectors. The policy implication is that the authorities might wish to tackle opportunistic behavior at source, i.e. by amending the parameters of the deposit insurance scheme.
Keywords: merit goods, paternalism, state, institutional change, government, public choice, banks, deposit guarantee, Russia, redistribution
JEL Classification: B52, D78, E65, G21, G28, H41
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