Deposit insurance, market discipline and bank risk

Arbeitspapier

Using evidence from Russia, we explore the effect of the introduction of deposit insurance on bank risk. Drawing on within-bank variation in the ratio of firm deposits to total household and firm deposits, so as to capture the magnitude of the decrease in market discipline after the introduction of deposit insurance, we demonstrate for private, domestic banks that larger declines in market discipline generate larger increases in traditional measures of risk. These results hold in a difference-in-difference setting in which state and foreign-owned banks, whose deposit insurance regime does not change, serve as a control.

Object Details

• ISBN: 978-952-323-275-4
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BOFIT Discussion Papers ; No. 10/2019

Classification and Topics

• Classification: Wirtschaft ; Studies of Particular Policy Episodes ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation ; Socialist Institutions and Their Transitions: Financial Economics
• Subject: deposit insurance ; market discipline ; moral hazard ; risk taking ; banks ; Russia

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Karas, Alexei ; Pyle, William ; Schoors, Koen
• Event: Veröffentlichung
• (who): Bank of Finland, Institute for Economies in Transition (BOFIT)
• (where): Helsinki
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/212918
• Last update: 10.03.2025, 11:43 AM CET