IDEAS home Printed from
   My bibliography  Save this article

Economic rehabilitation programme and the existence of implicit deposit insurance in North Cyprus


  • Nil Günsel


Purpose - The purpose of this paper is to investigate the role of implicit deposit insurance in North Cyprus Banking Sector during the period 1984-2002. Design/methodology/approach - A multivariate logit model is an empirical methodology that identifies the probability of bank failure. The model links the probability of banking problems to a set of bank-specific factors, macro-environment and structural weaknesses that may have exacerbated the internal troubles of the financial institutions. Findings - The empirical findings suggest that in addition to the microeconomic variables, high credit expansion to private sector, implicit deposit insurance, existence of economic rehabilitation programmed, financial liberalization, weak regulation and supervision played an important role in the escalation of the 2000-2002 banking distress in North Cyprus. Research limitations/implications - For further research, this paper may extend the time period and include other macroeconomic variables such as inflation, exchange pressure that may have a direct effect on bank failure in North Cyprus. Practical implications - This paper presents a practical application of the deposit insurance policy as a main determinant of bank failure, which would help bank examiners, investors and regulators in their decisions to alert management in time, to prevent bank failure. The ability for early detection of any structural or financial weaknesses in the country will help to minimize financial costs of the island that brought about by financial instability. Originality/value - Overall, the empirical results that are obtained by logit model analysis are quite robust. The logit regression results reveal that the predicted values, i.e. the potential risk levels for Mediterranean Bank was very high in this analysis. Towards 2005 Mediterranean Bank had to close, which prove that the model is robust.

Suggested Citation

  • Nil Günsel, 2009. "Economic rehabilitation programme and the existence of implicit deposit insurance in North Cyprus," Journal of Risk Finance, Emerald Group Publishing, vol. 10(3), pages 228-243, May.
  • Handle: RePEc:eme:jrfpps:v:10:y:2009:i:3:p:228-243

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters,in: Theory Of Valuation, chapter 8, pages 229-288 World Scientific Publishing Co. Pte. Ltd..
    2. Nielsen, J. Aase & Sandmann, Klaus, 2003. "Pricing Bounds on Asian Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(02), pages 449-473, June.
    3. Kemna, A. G. Z. & Vorst, A. C. F., 1990. "A pricing method for options based on average asset values," Journal of Banking & Finance, Elsevier, vol. 14(1), pages 113-129, March.
    4. Bakshi, Gurdip & Madan, Dilip, 2002. "Average Rate Claims with Emphasis on Catastrophe Loss Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(01), pages 93-115, March.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Cyprus; Banks; Business failures; Regulation; Insurance;


    Access and download statistics


    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:eme:jrfpps:v:10:y:2009:i:3:p:228-243. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.