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The National Deposit Insurance System - A Market Institution at the Crossroads

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  • Antoaneta Geala

    (Academia de Studii Economice / Facultatea de Finante, Asigurari, Banci si Burse de Valori)

Abstract

The safety net provided by deposit insurance systems gain heavily in weight at times of crisis. The correct set of such a cushion is critical to its effectiveness. While it helps to prevent bank runs, the severe market distortions are of great concern. The short term benefit of public confidence can be, far and away, offset by its long run negative effects consisting mainly in increased moral hazard, heavy public costs and impaired competition.

Suggested Citation

  • Antoaneta Geala, 2009. "The National Deposit Insurance System - A Market Institution at the Crossroads," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 1(1), pages 055-068, December.
  • Handle: RePEc:rfb:journl:v:01:y:2009:i:1:p:055-068
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    References listed on IDEAS

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