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Uninsured Deposits: Relevance and Evolutions Over Time

Author

Listed:
  • Van Roosebeke, Bert
  • Defina, Ryan
  • Wahyuni, Tri

Abstract

This global stock-taking of deposit insurance coverage ratios may offer a good first proxy for estimating the relevance of uninsured deposits. However, it is important to realise that the IADI Core Principles for Effective Deposit Insurance Systems (Core Principles) as global standards for deposit insurance focus on aggregated coverage ratios. Despite overall compliance with these standards by a jurisdiction, the share of deposits not covered by deposit insurance at a number of individual banks within this jurisdiction may be very high, which may give rise to increased bank-run risks. Deposit insurance standards currently do not explicitly account for this risk, which is implicitly assumed to be dealt with by prudential regulation and/or supervision. Ongoing research may offer further insights. Building on this stock-taking exercise, ongoing research will look into measures applied across the globe by deposit insurers that may help manage the risk of sudden and massive withdrawals by uninsured depositors. These will include the use of differentiated coverage levels, including temporary high balances, high and/or blanket coverage for payment and settlement accounts and voluntary top-up coverage levels.

Suggested Citation

  • Van Roosebeke, Bert & Defina, Ryan & Wahyuni, Tri, 2023. "Uninsured Deposits: Relevance and Evolutions Over Time," MPRA Paper 117601, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:117601
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    File URL: https://mpra.ub.uni-muenchen.de/117601/1/Policy%20Brief%208%20Uninsured%20Deposits%20Public%20-%20MPRA%20version.pdf
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    References listed on IDEAS

    as
    1. Bert Van Roosebeke & Ryan Defina, 2022. "COVID-19 and Covered Deposits," IADI Survey Briefs 2, International Association of Deposit Insurers.
    2. Rajkamal Iyer & Manju Puri & Nicholas Ryan, 2016. "A Tale of Two Runs: Depositor Responses to Bank Solvency Risk," Journal of Finance, American Finance Association, vol. 71(6), pages 2687-2726, December.
    3. Christopher Martin & Manju Puri & Alexander Ufier, 2018. "Deposit Inflows and Outflows in Failing Banks: The Role of Deposit Insurance," NBER Working Papers 24589, National Bureau of Economic Research, Inc.
    4. Bert Van Roosebeke & Ryan Defina, 2023. "Deposit Insurance in 2023: Global Trends and Key Issues," IADI Research Papers 23-02, International Association of Deposit Insurers.
    5. Andrew Davenport & Kathleen McDill, 2006. "The Depositor Behind the Discipline: A Micro-Level Case Study of Hamilton Bank," Journal of Financial Services Research, Springer;Western Finance Association, vol. 30(1), pages 93-109, August.
    6. Edwin Weinstein & Gulnur Muradoglu, 2023. "Who Wil Run Their Bank?," IADI Sponsored Papers 3, International Association of Deposit Insurers.
    7. 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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    Cited by:

    1. Cirillo, Niccolo & Pennesi, Francesco & Laviola, Sebastiano, 2024. "The 2023 Banking Turmoil: Lessons for EU Resolution Authorities," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 6(4), pages 1-54, March.
    2. Van Roosebeke, Bert & Defina, Ryan, 2023. "Global Trends in Deposit Insurance Coverage Ratios," MPRA Paper 118891, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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