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Bank time deposit rates and market discipline in Poland: the impact of state ownership and deposit insurance reform

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  • Thomas S. Mondschean
  • Timothy P. Opiela

Abstract

This paper examines the impact of ownership structure and changes in the deposit insurance system on the market for bank time deposits in Poland. In an environment of less restrictive bank supervision and a deposit insurance policy that favored state banks, we find depositors exacted a price for risk taking. After a new law increasing coverage for private banks went into effect, however, bank specific variables became less important in explaining differences in deposit interest rates. We report that the three fully guaranteed state banks pay significantly lower rates that private banks. However, other state-owned banks, with the same de jure guarantee as private banks, pay significantly lower rates than private banks, so it appears that depositors treat these state-owned banks as if they have a larger de facto guarantee.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-98-13.

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Date of creation: 1998
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Handle: RePEc:fip:fedhwp:wp-98-13

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Keywords: Poland ; Deposit insurance;

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References

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  1. Herbert Baer & Elijah Brewer, 1986. "The effect of bank risk on the price and availability of uninsured deposits," Proceedings 102, Federal Reserve Bank of Chicago.
  2. Timothy H. Hannan & Gerald A. Hanweck, 1986. "Bank insolvency risk and the market for large certificates of deposit," Working Papers in Banking, Finance and Microeconomics 86-1, Board of Governors of the Federal Reserve System (U.S.).
  3. Flannery, Mark J, 1998. "Using Market Information in Prudential Bank Supervision: A Review of the U.S. Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 273-305, August.
  4. Charalambos Christofides & Paul Mylonas & Inci Ötker & Liam P. Ebrill & Gerd Schwartz & Ajai Chopra, 1994. "Poland," IMF Occasional Papers 113, International Monetary Fund.
  5. Kane, Edward J., 1995. "Difficulties of transferring risk-based capital requirements to developing countries," Pacific-Basin Finance Journal, Elsevier, vol. 3(2-3), pages 193-216, July.
  6. Thomas S. Mondschean & Timothy P. Opiela, 1997. "Banking reform in a transition economy: the case of Poland," Economic Perspectives, Federal Reserve Bank of Chicago, issue Mar, pages 16-32.
  7. Calomiris, Charles W., 1990. "Is Deposit Insurance Necessary? A Historical Perspective," The Journal of Economic History, Cambridge University Press, vol. 50(02), pages 283-295, June.
  8. Piero Ugolini, 1996. "National Bank of Poland," IMF Occasional Papers 144, International Monetary Fund.
  9. Jeffrey A. Frankel & C. Fred Bergsten & Michael L. Mussa, 1994. "Exchange Rate Policy," NBER Chapters, in: American Economic Policy in the 1980s, pages 293-366 National Bureau of Economic Research, Inc.
  10. Ellis, David M. & Flannery, Mark J., 1992. "Does the debt market assess large banks, risk? : Time series evidence from money center CDs," Journal of Monetary Economics, Elsevier, vol. 30(3), pages 481-502, December.
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Citations

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Cited by:
  1. Disli, Mustafa & Schoors , Koen & Meir, Jos, 2013. "Political connections and depositor discipline," BOFIT Discussion Papers 6/2013, Bank of Finland, Institute for Economies in Transition.
  2. Opiela, Timothy P., 2004. "Was there an implicit full guarantee at financial institutions in Thailand? Evidence of risk pricing by depositors," Journal of Comparative Economics, Elsevier, vol. 32(3), pages 519-541, September.
  3. Michal Jurek, . "Role and impact of different types of financial institutions on economic performance and stability of the real sector in selected EU member states," Working papers wpaper36, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
  4. Jiranyakul, Komain & Opiela, Timothy, 2014. "Market Discipline at Thai Banks before the Asian Crisis," MPRA Paper 54492, University Library of Munich, Germany.
  5. Hulya Bayir, 2001. "Measuring the Impact of Full Coverage Deposit Insurance Policy in a Probit Model : A Study of the Privately Owned Commercial Banks in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 1(1), pages 1-23.
  6. Irwan Trinugroho & Agusman Agusman & Amine Tarazi, 2012. "Why Have Bank Interest Margins Been so High in Indonesia Since the 1997/1998 Financial Crisis?," Working Papers hal-00916531, HAL.
  7. Martin Eling & Dieter Kiesenbauer, 2012. "Does Surplus Participation Reflect Market Discipline? An Analysis of the German Life Insurance Market," Journal of Financial Services Research, Springer, vol. 42(3), pages 159-185, December.
  8. Hasan, Iftekhar & Jackowicz, Krzysztof & Kowalewski , Oskar & Kozlowski , Lukasz, 2013. "Market discipline during crisis: Evidence from bank depositors in transition countries," BOFIT Discussion Papers 21/2013, Bank of Finland, Institute for Economies in Transition.
  9. Chernykh, Lucy & Rebel, Cole, 2009. "Does Deposit Insurance Improve Financial Intermediation? Evidence from the Russian Experiment," MPRA Paper 12987, University Library of Munich, Germany.
  10. Imai, Masami, 2006. "Market discipline and deposit insurance reform in Japan," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3433-3452, December.
  11. Masami Imai, 2006. "Market Discipline and Deposit Insurance Reform in Japan," Wesleyan Economics Working Papers 2006-007, Wesleyan University, Department of Economics.
  12. Emmanuelle Nys & Amine Tarazi & Irwan Trinugroho, 2013. "Political Connections, Bank Deposits, and Formal Deposit Insurance: Evidence from an Emerging Economy," Working Papers hal-00916513, HAL.
  13. Cubillas, Elena & Fonseca, Ana Rosa & González, Francisco, 2012. "Banking crises and market discipline: International evidence," Journal of Banking & Finance, Elsevier, vol. 36(8), pages 2285-2298.
  14. Caprio, Gerard & Honohan, Patrick, 2004. "Can the unsophisticated market provide discipline?," Policy Research Working Paper Series 3364, The World Bank.

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