Deposit Insurance and Cross-Border Deposits in Times of Banking Crises: Recent Publication
GLOBUS Director Harald Sander recently published a paper titled: Deposit Insurance and Cross-Border Deposits in Times of Banking Crises. The aim of this publication is to show the effects of deposit insurance on global deposit flows and to inform policy makers on how to make global, regional and national financial systems more stable which has become even more important after the financial crisis
Deposit insurance systems are a common feature of the financial systems of most countries. Their rationale is twofold: to protect bank depositors in case of a bankruptcy and, even more importantly, to avoid widespread bankruptcies as a consequence of bank runs in the first place. However, in times of globally mobile capital, customers might look for safe(r) havens for their deposits abroad, especially when countries are experiencing a financial crisis. This can lead to a global competition for providing the best safety and, hence, destabilize the financial system of a crisis country even further. We show that there is a strong case for global and regional coordination. Our study therefore also lends support for establishing a common European Deposit Insurance System (EDIS) to make the Euro area more resilient to future crisis, Prof. Dr. Sander explains.
June 2019