Building a Stable European Deposit Insurance Scheme
Forthcoming in Journal of Financial Regulation 4(2)
9 Pages Posted: 25 May 2018
Date Written: May 14, 2018
Deposit insurance, like any insurance scheme, raises moral hazard concerns. Such concerns arising from European deposit insurance can be alleviated through a country-specific component in the risk-based premium for deposit insurance and limits on sovereign bond exposures on bank balance sheets. This paper, which forms part of the Euro Area Reform debate, argues, however, that proposals to maintain national compartments in a new European Deposit Insurance Scheme are self-defeating, as such compartments can be destabilising in times of crisis.
Keywords: Deposit insurance, Banking Union, moral hazard, risk-based premium
JEL Classification: F36, F42, G21, G28
Suggested Citation: Suggested Citation