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“Honey, the Bank Might Go Bust”: The Response of Finance Professionals to a Banking System Shock

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Abstract

How do informed depositors respond to a banking crisis? To shed light on this question, we apply conjoint analysis to a sample of 417 finance professionals from six countries. For a range of bank accounts that differ in the type and level of depositor protection that they offer, we ask each participant to indicate how they would respond to a banking system shock that could potentially affect their own bank. We find that intended withdrawal rates depend only on account profile attributes and are independent of respondent characteristics and respondent expectations about deposit interest rate changes. The most important account attributes are the existence of a formal deposit insurance fund and the fraction of the deposit at risk (particularly for under-capitalized banks).

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  • Glenn Boyle & Roger Stover & Amrit Tiwana & Oleksandr Zhylyevskyy, 2016. "“Honey, the Bank Might Go Bust”: The Response of Finance Professionals to a Banking System Shock," Working Papers in Economics 16/28, University of Canterbury, Department of Economics and Finance.
  • Handle: RePEc:cbt:econwp:16/28
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    File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1628.pdf
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    1. Rajkamal Iyer & Thais Jensen, & Niels Johannesen & Adam Sheridan, 2016. "The Run for Safety: Financial Fragility and Deposit Insurance," EPRU Working Paper Series 1602, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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    8. Boyle, Glenn & Stover, Roger & Tiwana, Amrit & Zhylyevskyy, Oleksandr, 2015. "The impact of deposit insurance on depositor behavior during a crisis: A conjoint analysis approach," Journal of Financial Intermediation, Elsevier, vol. 24(4), pages 590-601.
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    13. John C. Driscoll & Ruth Judson, 2013. "Sticky deposit rates," Finance and Economics Discussion Series 2013-80, Board of Governors of the Federal Reserve System (US).
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    More about this item

    Keywords

    finance professionals; banking crisis; conjoint analysis; deposit insurance;

    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

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