Does Deposit Insurance Increase Banking System Stability?

Demirgüç-Kunt, Asli; Detragiache, Enrica

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Does Deposit Insurance Increase Banking System Stability?

IMF Working Paper No. 00/3

29 Pages Posted: 30 Jan 2006

See all articles by Asli Demirgüç-Kunt

Enrica Detragiache

International Monetary Fund (IMF) - European Department

Date Written: January 2000

Abstract

This study analyzes panel data for 61 countries during 1980-97 and concludes that explicit deposit insurance tends to be detrimental to bank stability, the more so where bank interest rates are deregulated and the institutional environment is weak. Also, the adverse impact of deposit insurance on bank stability tends to be stronger when the coverage offered to depositors is extensive, when the scheme is funded, and when it is run by the government rather than by the private sector.

JEL Classification: G28, G21, E44

Suggested Citation: Suggested Citation

Demirgüç-Kunt, Asli and Detragiache, Enrica, Does Deposit Insurance Increase Banking System Stability? (January 2000). IMF Working Paper No. 00/3, Available at SSRN: https://ssrn.com/abstract=879307