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Demand Deposits Insurance and Double Liability : The effect On Incentives

Listed author(s):
  • Nechita Radu

    (Université d’Aix-Marseille & Université de Babes-Bolyai)

Registered author(s):

    The deposit insurance (DI) makes the value of deposits independent from the behavior of other depositors or from the value of bank assets. Its existence induces a moral hazard which might threaten the stability of the banking system. The efficiency of the DI depends on the control of moral hazard, which means the agents responsibilisation, depositors included. There is a conflict between the DI principles and the present propositions improving this mechanism.The possible solutions in order to solve this paradox are the restriction of the insurance coverage only for the demand deposits and the implementation of the double liability for the bank shareholders.The demand deposits insurance eliminates the incentive to bank runs caused by the fear of lack of liquidity, whereas the term deposits are exposed to losses which reduce the moral hazard induced by the demand deposit insurance.The double liability forces the shareholders of the defaulting banks to make supplementary payments limited to the nominal value of the owned shares. This combines the advantages of the limited liability and the unlimited liability.The efficiency of both propositions implies the enforcement of a closure rule of the banks whose net worth is close to zero.La garantie des dépôts rend la valeur des dépôts indépendante du comportement des autres déposa- nts ou de la valeur des actifs bancaires. Son instauration induit un aléa moral qui peut menacer la stabilité du système bancaire. Lefficacité de ce mécanisme dépend de la maîtrise de laléa moral. Cela suppose, entre autres, la responsabilisation des agents, y compris des déposants. Par conséquent, il existe un conflit entre le principe de la garantie des dépôts et les propositions courantes damélioration de ce dispositif.Les solutions envisagées dans cet article pour résoudre ce paradoxe sont la limitation de la garantie aux seuls dépôts à vue et linstauration de la double responsabilité pour les actionnaires des banques.La garantie des dépôts à vue élimine lincitation à la ruée due à la crainte de manque de liquidité, tandis que les dépôts à terme sont assortis dune clause permettant à la banque de refuser tout retrait anticipé. Les titulaires des dépôts à terme sexposent à des pertes, ce qui réduit laléa moral induit par la garantie des dépôts à vue.La double responsabilité oblige les actionnaires des banques défaillantes à effectuer des versements supplémentaires dans la limite de la valeur nominale des actions détenues. Cela réunit les avantages de la responsabilité limitée (plafonnement prédéterminé des pertes, possibilité de dispersion des risques) et de la responsabilité illimitée (adoption de stratégies plus prudentes, recapitalisation ou liquidation volontaire dans des situations où la responsabilité limitée simple inciterait à une augmentation du risque).Lefficacité des deux propositions suppose lapplication dune règle de fermeture des banques dont lactif net avoisine zéro.

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    Article provided by De Gruyter in its journal Journal des Economistes et des Etudes Humaines.

    Volume (Year): 13 (2003)
    Issue (Month): 1 (March)
    Pages: 1-44

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    Handle: RePEc:bpj:jeehcn:v:13:y:2003:i:1:n:2
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    1. Edward J. Kane & Berry Wilson, 1998. "A contracting-theory intepretation of the origins of Federal deposit insurance," Proceedings, Federal Reserve Bank of Cleveland, issue Aug, pages 573-595.
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    8. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
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