Financial Inclusion for Financial Stability: Access to Bank Deposits and the Growth of Deposits in the Global Financial Crisis

27 Pages Posted: 20 Apr 2016

Date Written: August 1, 2013

Abstract

In crisis times, depositors get anxious, can run on banks, and withdraw their deposits. Correlated withdrawals of bank deposits could be mitigated if bank deposits are more diversified, that is, held by more individuals. This paper examines the link between the broader access to bank deposits prior to the 2008 crisis and the dynamics of bank deposit growth during the crisis, while controlling for relevant covariates. Employing proxies for access to deposits and the use of bank deposits, the authors find that greater access to bank deposits can make the deposit funding base of banks more resilient in times of financial stress. Policy efforts to enhance financial stability should thus not only focus on macroprudential regulation, but also recognize the positive effect of broader access to bank deposits on financial stability.

Keywords: Debt Markets, Banks & Banking Reform, Access to Finance, Deposit Insurance, Emerging Markets

Suggested Citation

Han, Rui and Melecky, Martin, Financial Inclusion for Financial Stability: Access to Bank Deposits and the Growth of Deposits in the Global Financial Crisis (August 1, 2013). World Bank Policy Research Working Paper No. 6577. Available at SSRN: https://ssrn.com/abstract=2312982

Rui Han (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Martin Melecky

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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