Resolution of Failed Banks by Deposit Insurers: Cross-Country Evidence

34 Pages Posted: 20 Apr 2016

See all articles by Luc Laeven

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Date Written: May 2006

Abstract

There is a wide cross-country variation in the institutional structure of bank failure resolution, including the role of the deposit insurer. The authors use quantitative analysis for 57 countries and discuss specific country cases to illustrate this variation. Using data for over 1,700 banks across 57 countries, they show that banks in countries where the deposit insurer has the responsibility of intervening failed banks and the power to revoke membership in the deposit insurance scheme are more stable and less likely to become insolvent. Involvement of the deposit insurer in bank failure resolution thus dampens the negative effect that deposit insurance has on banks' risk taking.

Keywords: Banks & Banking Reform, Financial Crisis Management & Restructuring, Financial Intermediation, Corporate Law, Insurance & Risk Mitigation

Suggested Citation

Laeven, Luc A. and Beck, Thorsten, Resolution of Failed Banks by Deposit Insurers: Cross-Country Evidence (May 2006). World Bank Policy Research Working Paper No. 3920, Available at SSRN: https://ssrn.com/abstract=913211

Luc A. Laeven (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Thorsten Beck

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

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