IDEAS home Printed from https://ideas.repec.org/p/pab/fiecac/13.01.html
   My bibliography  Save this paper

Evaluating the effects of the EU directive proposal for risk-based deposit insurance premiums in Spain

Author

Listed:
  • Pilar Gómez-Fernández-Aguado

    (Department of Financial Economics and Accounting, Universidad de Jaén)

  • Antonio Partal-Ureña

    (Department of Financial Economics and Accounting, Universidad de Jaén)

  • Antonio Trujillo-Ponce

    (Department of Financial Economics and Accounting, Universidad Pablo de Olavide)

Abstract

Using This paper analyzes the effects on the Spanish banking system of the EU proposal for a new Directive on deposit insurance systems based on risk-sensitive premiums. To do this, we examine the risk profile of Spanish banks during the 2007-2011 period according to several indicators reflecting capital adequacy, asset quality, profitability and liquidity. We conclude that most of banks would increase their contributions with the proposed system, evidencing the cyclical character of the new model. Our results also suggest that risk-based schemes could provide an incentive for sound management by reducing the premiums for those banks with better risk profiles.

Suggested Citation

  • Pilar Gómez-Fernández-Aguado & Antonio Partal-Ureña & Antonio Trujillo-Ponce, 2013. "Evaluating the effects of the EU directive proposal for risk-based deposit insurance premiums in Spain," Working Papers 13.01, Universidad Pablo de Olavide, Department of Financial Economics and Accounting (former Department of Business Administration).
    • Handle: RePEc:pab:fiecac:13.01
    as

    Download full text from publisher

    File URL: http://www.upo.es/serv/bib/fiecac/fiecac1301.pdf
    File Function: First version, 2013
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Viral V. Acharya & Tanju Yorulmazer, 2008. "Cash-in-the-Market Pricing and Optimal Resolution of Bank Failures," The Review of Financial Studies, Society for Financial Studies, vol. 21(6), pages 2705-2742, November.
    2. David G. Mayes, 2009. "Did Recent Experience of a Financial Crisis Help in Coping with the Current Financial Turmoil? The Case of the Nordic Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 47(5), pages 997-1015, November.
    3. João A. C. Santos, 2006. "Insuring Banks Against Liquidity Shocks: The Role of Deposit Insurance and Lending of Last Resort," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 459-482, July.
    4. Riccardo Lisa & Stefano Zedda & Francesco Vallascas & Francesca Campolongo & Massimo Marchesi, 2011. "Modelling Deposit Insurance Scheme Losses in a Basel 2 Framework," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(3), pages 123-141, December.
    5. Ensar Yilmaz & Alovsat Muslumov, 2008. "Deposit insurance and moral hazard problem: the case of Turkish banking system," Applied Economics, Taylor & Francis Journals, vol. 40(16), pages 2147-2163.
    6. Ioannidou, Vasso P. & Penas, María Fabiana, 2010. "Deposit insurance and bank risk-taking: Evidence from internal loan ratings," Journal of Financial Intermediation, Elsevier, vol. 19(1), pages 95-115, January.
    7. Episcopos, Athanasios, 2004. "The implied reserves of the Bank Insurance Fund," Journal of Banking & Finance, Elsevier, vol. 28(7), pages 1617-1635, July.
    8. Dilip Madan & George Pennacchi, 2003. "Introduction: Special Issue on Pricing the Risks of Deposit Insurance," Journal of Financial Services Research, Springer;Western Finance Association, vol. 24(2), pages 89-92, October.
    9. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 8, pages 229-288, World Scientific Publishing Co. Pte. Ltd..
    10. Pennacchi, George, 2006. "Deposit insurance, bank regulation, and financial system risks," Journal of Monetary Economics, Elsevier, vol. 53(1), pages 1-30, January.
    11. Armen Hovakimian & Edward Kane & Luc Laeven, 2003. "How Country and Safety-Net Characteristics Affect Bank Risk-Shifting," Journal of Financial Services Research, Springer;Western Finance Association, vol. 23(3), pages 177-204, June.
    12. Merton, Robert C., 1977. "An analytic derivation of the cost of deposit insurance and loan guarantees An application of modern option pricing theory," Journal of Banking & Finance, Elsevier, vol. 1(1), pages 3-11, June.
    13. Gillian G. H. Garcia & Maria J. Nieto, 2007. "Preserving Financial Stability: A Dilemma For The European Union," Contemporary Economic Policy, Western Economic Association International, vol. 25(3), pages 444-458, July.
    14. Chan, Yuk-Shee & Greenbaum, Stuart I & Thakor, Anjan V, 1992. "Is Fairly Priced Deposit Insurance Possible?," Journal of Finance, American Finance Association, vol. 47(1), pages 227-245, March.
    15. Morrison, Alan D. & White, Lucy, 2011. "Deposit insurance and subsidized recapitalizations," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3400-3416.
    16. VanHoose, David, 2007. "Theories of bank behavior under capital regulation," Journal of Banking & Finance, Elsevier, vol. 31(12), pages 3680-3697, December.
    17. Antonio Trujillo-Ponce, 2013. "What determines the profitability of banks? Evidence from Spain," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(2), pages 561-586, June.
    18. Lucia Quaglia, 2013. "Financial regulation and supervision in the European Union after the crisis," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 16(1), pages 17-30, March.
    19. O'Hara, Maureen & Shaw, Wayne, 1990. "Deposit Insurance and Wealth Effects: The Value of Being "Too Big to Fail."," Journal of Finance, American Finance Association, vol. 45(5), pages 1587-1600, December.
    20. Beat Bernet & Susanna Walter, 2009. "Design, Structure and Implementation of a Modern Deposit Insurance Scheme," SUERF Studies, SUERF - The European Money and Finance Forum, number 2009/5 edited by Morten Balling, May.
    21. David G. Mayes, 2009. "Did Recent Experience of a Financial Crisis Help in Coping with the Current Financial Turmoil? The Case of the Nordic Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 47(5), pages 997-1015, November.
    22. Lee, Wai Sing & Kwok, Chuck C. Y., 2000. "Domestic and international practice of deposit insurance: a survey," Journal of Multinational Financial Management, Elsevier, vol. 10(1), pages 29-62, January.
    23. Jeremy Staum, 2012. "Systemic risk components and deposit insurance premia," Quantitative Finance, Taylor & Francis Journals, vol. 12(4), pages 651-662, January.
    24. Lucia Quaglia, 2013. "Financial regulation and supervision in the European Union after the crisis," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 16(1), pages 17-30.
    25. Pennacchi, George G., 2005. "Risk-based capital standards, deposit insurance, and procyclicality," Journal of Financial Intermediation, Elsevier, vol. 14(4), pages 432-465, October.
    26. Marcus, Alan J & Shaked, Israel, 1984. "The Valuation of FDIC Deposit Insurance Using Option-pricing Estimates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 446-460, November.
    27. Demirguc-Kunt, Asli & Huizinga, Harry, 2004. "Market discipline and deposit insurance," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 375-399, March.
    28. Hwang, Dar-Yeh & Shie, Fu-Shuen & Wang, Kehluh & Lin, Jung-Chu, 2009. "The pricing of deposit insurance considering bankruptcy costs and closure policies," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1909-1919, October.
    29. Viral V. Acharya & João A. C. Santos & Tanju Yorulmazer, 2010. "Systemic risk and deposit insurance premiums," Economic Policy Review, Federal Reserve Bank of New York, vol. 16(Aug), pages 89-99.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Aida Barkauskaite & Ausrine Lakstutiene & Justyna Witkowska, 2018. "Measurement of Systemic Risk in a Common European Union Risk-Based Deposit Insurance System: Formal Necessity or Value-Adding Process?," Risks, MDPI, vol. 6(4), pages 1-21, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pilar G -Fernᮤez-Aguado & Antonio Partal-Ure & Antonio Trujillo-Ponce, 2014. "Moving toward risk-based deposit insurance premiums in the European Union: the case of Spain," Applied Economics, Taylor & Francis Journals, vol. 46(13), pages 1547-1564, May.
    2. International Association of Deposit Insurers, 2020. "Evaluation of Differential Premium Systems for Deposit Insurance," IADI Research Papers 20-06, International Association of Deposit Insurers.
    3. Lee, Shih-Cheng & Lin, Chien-Ting & Tsai, Ming-Shann, 2015. "The pricing of deposit insurance in the presence of systematic risk," Journal of Banking & Finance, Elsevier, vol. 51(C), pages 1-11.
    4. Camara, Antonio & Davidson, Travis & Fodor, Andrew, 2020. "Bank asset structure and deposit insurance pricing," Journal of Banking & Finance, Elsevier, vol. 114(C).
    5. Raheel Mumtaz & Imran Abbas Jadoon, 2018. "Effect of explicit deposit insurance premium on the moral hazard of banks’ risk-taking: Around the globe," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 1-24, June.
    6. Volker Britz & Hans Gersbach & Hans Haller, 2021. "Deposit insurance and reinsurance," Annals of Finance, Springer, vol. 17(4), pages 425-470, December.
    7. Liu, Liuling & Zhang, Gaiyan & Fang, Yiwei, 2016. "Bank credit default swaps and deposit insurance around the world," Journal of International Money and Finance, Elsevier, vol. 69(C), pages 339-363.
    8. Chuang-Chang Chang & Ruey-Jenn Ho, 2017. "Risk-Shifting Behavior At Commercial Banks With Different Deposit Insurance Assessments: Further Evidence From U.S. Markets," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 40(1), pages 55-80, March.
    9. Fernández-Aguado, Pilar Gómez & Martínez, Eduardo Trigo & Ruíz, Rafael Moreno & Ureña, Antonio Partal, 2022. "Evaluation of European Deposit Insurance Scheme funding based on risk analysis," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 234-247.
    10. Westman, Hanna, 2011. "The impact of management and board ownership on profitability in banks with different strategies," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3300-3318.
    11. Brahim Guizani & Wako Watanabe, 2010. "The Deposit Insurance and the Risk-Shifting Incentive Evidence from the Blanket Deposit Insurance in Japan," Keio/Kyoto Joint Global COE Discussion Paper Series 2010-004, Keio/Kyoto Joint Global COE Program.
    12. Episcopos, Athanasios, 2008. "Bank capital regulation in a barrier option framework," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1677-1686, August.
    13. Pennacchi, George G., 2005. "Risk-based capital standards, deposit insurance, and procyclicality," Journal of Financial Intermediation, Elsevier, vol. 14(4), pages 432-465, October.
    14. Klüh, Ulrich, 2005. "Safety Net Design and Systemic Risk: New Empirical Evidence," Discussion Papers in Economics 662, University of Munich, Department of Economics.
    15. George Pennacchi, 1999. "The Effects of Setting Deposit Insurance Premiums to Target Insurance Fund Reserves," Journal of Financial Services Research, Springer;Western Finance Association, vol. 16(2), pages 153-180, December.
    16. Jonathan Carroll & Shino Takayama, 2014. "A hierarchical agency model of deposit insurance," Annals of Finance, Springer, vol. 10(2), pages 267-290, May.
    17. Hwang, Dar-Yeh & Shie, Fu-Shuen & Wang, Kehluh & Lin, Jung-Chu, 2009. "The pricing of deposit insurance considering bankruptcy costs and closure policies," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1909-1919, October.
    18. Anginer, Deniz & Demirguc-Kunt, Asli & Zhu, Min, 2014. "How does deposit insurance affect bank risk? Evidence from the recent crisis," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 312-321.
    19. Jacopo Carmassi & Sonja Dobkowitz & Johanne Evrard & Laura Parisi & André F Silva & Michael Wedow, 2020. "Completing the Banking Union with a European deposit insurance scheme: who is afraid of cross-subsidization?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 35(101), pages 41-95.
    20. Brandao-Marques, L. & Correa, R. & Sapriza, H., 2012. "International Evidence on Government Support and Risk-Taking in the Banking Sector," Other publications TiSEM 4a9756af-eb63-4867-ae29-3, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    Banking regulation; financial safety net; deposit insurance premiums; deposit insurance system; moral hazard; European banking system;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pab:fiecac:13.01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Publicación Digital - UPO (email available below). General contact details of provider: https://edirc.repec.org/data/dfupoes.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.