What Do Depositors Know About Risk?
26 Pages Posted: 3 Oct 2011 Last revised: 12 Feb 2012
Date Written: September 2, 2011
The limited success of bank supervision can be better understood by taking into consideration the country conditions and market-based measures that are e ective in constraining bank risk. Comparing depositors' reaction in two countries, the Russian Federation and Turkey, we nd di erentiated reaction by depositors to bank risks. In the Russian Federation, depositors weakly respond to increased bank risks only with the possibility of withdrawing funds. However, in Turkey depositors exercise both quantity and price discipline on the banks which facilitates in identifying risky banks. The ndings of this study suggest that the experiences of depositors in both countries seem to play important role in reliance to market discipline in the future.
Keywords: Bank Risk, Monitoring, Large Depositors, Market Discipline
JEL Classification: G21, G32
Suggested Citation: Suggested Citation