Deposit Insurance and Crisis Management
81 Pages Posted: 9 Feb 2006
Date Written: March 2000
Abstract
A well-designed deposit insurance system (DIS) will provide incentives for citizens to keep the financial system sound. However, a poorly designed DIS can foster a financial crisis. This paper, therefore, makes recommendations for creating and running a limited, incentive-compatible, DIS. The paper also examines factors in the decision to grant, temporarily, a comprehensive guarantee, and the design of that guarantee, should a systemic financial crisis nevertheless occur. It concludes with guidance on the removal of that guarantee.
Keywords: Deposit insurance, comprehensive guarantee
JEL Classification: G18, G21, G22, G28, G30
Suggested Citation: Suggested Citation
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