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Post-Resolution Treatment of Depositors At Failed Banks; Implications for the Severity of Banking Crises, Systemic Risk, and too-Big-To-Fail

Author

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  • George G. Kaufman
  • Steven A. Seelig

Abstract

Losses may accrue to depositors at insolvent banks both at and after the time of official resolution. Losses at resolution occur because of poor closure rules and regulatory forbearance. Losses after resolution occur if depositors' access to their claims is delayed or "frozen." While the sources and implications of losses at resolution have been analyzed previously, the sources and implications of losses after resolution have received little attention. This paper examines the causes of delayed depositors' access to their funds at resolved banks, describes how the FDIC provides immediate access, reports on a special survey of access practices in other countries, and analyzes the costs and benefits of delayed access in terms of both the effects on market discipline and depositor pressure to protect all deposits.

Suggested Citation

  • George G. Kaufman & Steven A. Seelig, 2001. "Post-Resolution Treatment of Depositors At Failed Banks; Implications for the Severity of Banking Crises, Systemic Risk, and too-Big-To-Fail," IMF Working Papers 01/83, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:01/83
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    References listed on IDEAS

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    1. Kane, Edward J, 1990. " Principal-Agent Problems in S&L Salvage," Journal of Finance, American Finance Association, vol. 45(3), pages 755-764, July.
    2. Demirguc-Kunt, Asl1 & Huizinga, Harry, 1999. "Market discipline and financial safety net design," Policy Research Working Paper Series 2183, The World Bank.
    3. George G. Kaufman, 1990. "Are Some Banks Too Large To Fail? Myth And Reality," Contemporary Economic Policy, Western Economic Association International, vol. 8(4), pages 1-14, October.
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    Cited by:

    1. Eric Santor, 2003. "Banking Crises and Contagion: Empirical Evidence," Staff Working Papers 03-1, Bank of Canada.

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