Deposit Insurance and Depositor Behavior: Evidence from Colombia
38 Pages Posted:
Date Written: February 17, 2021
We exploit a large and unexpected increase in the Colombian insurance threshold to investigate how depositors respond to higher deposit insurance. Monthly depositor-level records from a major bank show that the level and growth rate of deposits rise with higher coverage. Individuals who were fully and nearly-fully insured before the policy drive this increment. A survey of bank customers indicates that higher deposits were replenished by lowering cash and other assets. We estimate an elasticity of deposit growth to deposit insurance of 0.4%, and find a similar figure in the United States by leveraging the 2008 increase in deposit insurance.
Keywords: Banking, Financial Regulation, Household Saving
JEL Classification: G21, G28, G51
Suggested Citation: Suggested Citation