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Systemic Financial Crises: How to Fund Resolution

Author

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  • Sebastian Schich
  • Byoung-Hwan Kim

Abstract

Systemic financial crises are a recurrent phenomenon, and despite regulatory efforts they are likely to occur again. This report compares the ex ante funding of deposit insurance schemes in a selection of countries, highlighting the “funding gap” left by these arrangements in the recent systemic financial crisis. To fill that gap, different approaches have been adopted across countries in the recent crisis. Where support for the financial sector was provided as part of policy response to the crisis, new taxes have been adopted to generate revenues ex post, although the specific approaches have differed. While there is no single solution in this regard, this report finds that ex ante funded systemic crisis resolution funds, together with strengthened failure resolution powers, are in principle adequate to help fill the gap. JEL Classification: E44, G01, G21, G28, E61, H21. Keywords: systemic financial crisis, systemic crisis resolution fund, deposit insurance, financial activities taxes, ex ante versus ex post funding.

Suggested Citation

  • Sebastian Schich & Byoung-Hwan Kim, 2011. "Systemic Financial Crises: How to Fund Resolution," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2010(2), pages 1-34.
    • Handle: RePEc:oec:dafkad:5kgk9qpnblxw
    DOI: 10.1787/fmt-2010-5kgk9qpnblxw
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    Citations

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    Cited by:

    1. Jon Danielsson & Marcela Valenzuela & Ilknur Zer, 2018. "Learning from History: Volatility and Financial Crises," The Review of Financial Studies, Society for Financial Studies, vol. 31(7), pages 2774-2805.
    2. Wanvimol Sawangngoenyuang & Sukrita Sa-nguanpan & Worawut Sabborriboon, 2012. "Financial Systemic Stability: Challenging Aspects of Central Banks," Working Papers 2012-06, Monetary Policy Group, Bank of Thailand.
    3. Müller, Danny & Knoll, Christian & Gravogl, Georg & Artner, Werner & Welch, Jan M. & Eitenberger, Elisabeth & Friedbacher, Gernot & Schreiner, Manfred & Harasek, Michael & Hradil, Klaudia & Werner, An, 2019. "Tuning the performance of MgO for thermochemical energy storage by dehydration – From fundamentals to phase impurities," Applied Energy, Elsevier, vol. 253(C), pages 1-1.

    More about this item

    Keywords

    systemic financial crisis; systemic crisis resolution fund; deposit insurance; financial activities taxes; ex ante versus ex post funding.;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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