57 Pages Posted: 24 Jan 2007 Last revised: 25 Aug 2010
Date Written: January 2007
This paper identifies factors that influence decisions about a country's financial safety net, using a comprehensive dataset covering 180 countries during the 1960-2003 period. Our analysis focuses on how private interest-group pressures, outside influences, and political-institutional factors affect deposit-insurance adoption and design. Controlling for macroeconomic shocks, quality of bank regulations, and institutional development, we find that both private and public interests, as well as outside influences to emulate developed-country regulatory schemes, can explain the timing of adoption decisions and the rigor of loss-control arrangements. Controlling for other factors, political systems that facilitate intersectoral power sharing dispose a country toward design features that accommodate risk-shifting by banks.
Suggested Citation: Suggested Citation
Demirgüç-Kunt, Asli and Kane, Edward J. and Laeven, Luc, Determinants of Deposit-Insurance Adoption and Design (January 2007). NBER Working Paper No. w12862. Available at SSRN: https://ssrn.com/abstract=959136