Structuring Deposit Insurance for a United Europe
Posted: 15 Jul 1998
Date Written: April 1993
This paper analyzes the difficulties associated with bank regulation and deposit insurance in a unified Europe. Specifically, the consequences of the Second Coordinating Banking Directive and the "common passport" branching regulation are explored. Issues of deposit insurance premiums and taxes on banks (including reserve taxes) are analyzed in the context of a general equilibrium model. The results indicate that taxes and deposit insurance are interdependent in such a structure. Therefore a common insurance fund may not be specific for a unified insurance scheme; coordinated and even unified taxation may also be necessary. At the minimum, exceedingly close macroeconomic policy coordination will be necessary for the single market for financial services to truly come to fruition and be stable. A similar degree of cooperation will be necessary in the area of bank regulation as well.
JEL Classification: F36, F42, G21
Suggested Citation: Suggested Citation