Deposit Insurance in Times of Crises: Safe Haven or Regulatory Arbitrage?
43 Pages Posted: 4 Oct 2015 Last revised: 31 May 2017
Date Written: April 26, 2017
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: Suggested Citation