The Role of Deposit Guarantee Schemes (DGSs) within the Crisis Management Framework

28 Pages Posted: 1 Dec 2020

See all articles by Christos Gortsos

Christos Gortsos

National and Kapodistrian University of Athens; EUSFIL Jean Monnet Centre of Excellence

Multiple version iconThere are 2 versions of this paper

Date Written: November 25, 2020

Abstract

The present study undertakes an overview of the role of deposit guarantee schemes (DGSs) within the banking crisis management framework. It is structured in four Section:

Section 1 discusses the policy objectives of DGSs, namely the protection of depositors and the
contribution to the stability of the banking system. Section 2 turns then to the functions (mandates) of DGSs, with a main focus on their institutional design as to the ‘payout (or paybox) function’ and their contribution in resolution financing. Section 3 is on DGSs’ role within the economic and the financial system, developing on their effectiveness as influenced not only by their design features but also by the environment within which they operate and predominantly by macroeconomic conditions and the strength of the sovereign and their institutional relationship with other ‘bank safety net’ components.
Finally, the liability of states when establishing DGSs and the problems arising from the operation of
DGSs, namely exposure to moral hazard and the differential treatment of banks deemed ‘too-big-to-fail’ (TBTF), are discussed in Section 4.

Keywords: Deposit guarantee schemes (DGSs), bank runs, stability of the banking system, bank safety net, resolution financing, ‘no creditor worse off (NCWO) principle’, moral hazard, too big to fail, International Association of Deposit Insurers (IADI)

JEL Classification: E50, E53, E58, G21, G28. K00, K23, K33

Suggested Citation

Gortsos, Christos, The Role of Deposit Guarantee Schemes (DGSs) within the Crisis Management Framework (November 25, 2020). European Banking Institute Working Paper Series 2020 - no.78, Available at SSRN: https://ssrn.com/abstract=3737424 or http://dx.doi.org/10.2139/ssrn.3737424

Christos Gortsos (Contact Author)

National and Kapodistrian University of Athens ( email )

EUSFIL Jean Monnet Centre of Excellence ( email )

Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
200
Abstract Views
802
Rank
280,632
PlumX Metrics