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Deposit Insurance in Times of Crises: Safe Haven or Regulatory Arbitrage?

43 Pages Posted: 4 Oct 2015 Last revised: 31 May 2017

Shusen Qi

Maastricht University - Department of Finance; Xiamen University - School of Management

Stefanie Kleimeier

Maastricht University - Department of Finance

Harald Sander

University of Applied Sciences Cologne

Date Written: April 26, 2017

Abstract

This paper examines the impact of deposit insurance (DI) schemes on bilateral cross-border deposits. Our results suggest that not only the existence of explicit DI, but also DI design features, which reflect its credibility have an impact on cross-border deposits, and that the relative differences between reporting and depositor countries also matter. However, in times of crises, DI acts primarily as a “Safe Haven” and stimulates “Regulatory Arbitrage” only to a limited extent. During the global financial crisis of 2008/09 the emergency actions of bank country governments, which supply and maintain these safe havens, have led to substantial relocations of cross-border deposits.

Keywords: Deposit Insurance; Cross-border deposits; Systemic banking crises; Gravity model

JEL Classification: F34; G18

Suggested Citation

Qi, Shusen and Kleimeier, Stefanie and Sander, Harald, Deposit Insurance in Times of Crises: Safe Haven or Regulatory Arbitrage? (April 26, 2017). Available at SSRN: https://ssrn.com/abstract=2668495 or http://dx.doi.org/10.2139/ssrn.2668495

Shusen Qi

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

Xiamen University - School of Management ( email )

No.422 Siming Nan Road
Xiamen, Fujian 361005
China

Stefanie Kleimeier (Contact Author)

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

Harald Sander

University of Applied Sciences Cologne ( email )

Claudiusstrrasse 1
50678 Cologne
Germany
+49 221 82753419 (Phone)
+49 221 82753131 (Fax)

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