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What Awareness? Consumer Perception of Bank Risk and Deposit Insurance

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  • Michiel Bijlsma

    ()

  • Karen van der Wiel

    ()

Abstract

This paper provides unique survey evidence on consumer awareness about deposit insurance and on consumer perception of the stability of small and systemic banks. It turns out that systemic banks are perceived as less risky compared to non-systemic banks and that respondents’ own bank is considered safer than other banks. We also find that knowledge on the eligibility for deposit insurance is limited, in particular when it concerns small banks. In addition, consumers generally expect an associated payback time that well exceeds the time it has taken to pay back depositors in the past, expecting a higher as well as faster payback for large, systemic banks. This confirms that households’ awareness of the coverage and operations of deposit insurance are suboptimal. We also find that awareness about and trust in the deposit insurance system has only a marginal effect on deposit behavior in “normal” and “crisis” times. Thus, while the evidence suggests that there is ample scope to improve awareness about deposit insurance, it is far from sure that such policies will affect household behavior.

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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 205.

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Date of creation: Feb 2012
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Handle: RePEc:cpb:discus:205

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  1. Edward J. Kane & Asli Demirguc-Kunt, 2001. "Deposit Insurance Around the Globe: Where Does it Work?," NBER Working Papers 8493, National Bureau of Economic Research, Inc.
  2. Carin van der Cruijsen & Jakob de Haan & David-Jan Jansen & Robert Mosch, 2010. "Knowledge and Opinions about Banking Supervision: Evidence from a Survey of Dutch Households," DNB Working Papers, Netherlands Central Bank, Research Department 275, Netherlands Central Bank, Research Department.
  3. Gaudecker, Hans-Martin von & van Soest, Arthur & Wengström, Erik, 2009. "Heterogeneity in Risky Choice Behaviour in a Broad Population," IZA Discussion Papers 4022, Institute for the Study of Labor (IZA).
  4. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
  5. Schotter, Andrew & Yorulmazer, Tanju, 2009. "On the dynamics and severity of bank runs: An experimental study," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 217-241, April.
  6. Demirguc-Kunt, Asli & Detragiache, Enrica, 1999. "Does deposit insurance increase banking system stability ? An empirical investigation," Policy Research Working Paper Series 2247, The World Bank.
  7. Rajkamal Iyer & Manju Puri, 2008. "Understanding Bank Runs: The Importance of Depositor-Bank Relationships and Networks," NBER Working Papers 14280, National Bureau of Economic Research, Inc.
  8. Hyun Song Shin, 2009. "Reflections on Northern Rock: The Bank Run That Heralded the Global Financial Crisis," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 101-19, Winter.
  9. David S. Hoelscher & Michael Taylor & Ulrich H. Klueh, 2006. "The Design and Implementation of Deposit Insurance Systems," IMF Occasional Papers 251, International Monetary Fund.
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