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Implicit and Explicit Deposit Insurance and Depositor Behavior

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  • Sümeyra Atmaca
  • Karolin Kirschenmann
  • Steven Ongena
  • Koen Schoors

Abstract

We employ proprietary data from a large bank to analyze how – during crisis – deposit insurance affects depositor behavior. Our focus is on Belgium where the government increased explicit deposit insurance coverage and implemented implicit deposit insurance arrangements. Estimating sorting below the respective insurance limits shows that depositors are aware of and understand these interventions. Difference-in-differences estimates show that both the increase in the explicit deposit insurance limit and the implicit deposit insurance had the intended calming effect on depositors. Close depositor-bank relationships mitigate these effects, while political trust seems to boost the general effectiveness of such government policies.

Suggested Citation

  • Sümeyra Atmaca & Karolin Kirschenmann & Steven Ongena & Koen Schoors, 2023. "Implicit and Explicit Deposit Insurance and Depositor Behavior," CRC TR 224 Discussion Paper Series crctr224_2023_476, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2023_476
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    More about this item

    Keywords

    deposit insurance; coverage limit; implicit deposit guarantee; bank nationalization; depositor heterogeneity;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H13 - Public Economics - - Structure and Scope of Government - - - Economics of Eminent Domain; Expropriation; Nationalization
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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