Browsing by Subject "EDIS"

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  • Kiema, Ilkka; Jokivuolle, Esa (2019)
    Revue de l'OFCE
    Empirical evidence shows that a financial distress, faced by a bank or the whole economy, might cause large-scale withdrawals of deposits even when bank deposits are protected by deposit insurance, implicitly or explicitly guaranteed by a government. Building on Kiema and Jokivuolle (2015), we present a new model of such partial bank runs. In our model withdrawals are caused by the fear that both the bank and the government's deposit guarantee might fail in the future. Our focus is on a guarantee rather than on insurance, since the assets of deposit insurance funds might not be sufficient in large-scale systemic crises. Guarantee failure is possible because, being sovereign, the government may choose not to keep its promises. This option causes a fixed welfare cost (e.g. a reputational cost), which in a sufficiently severe crisis may be smaller than the costs from deposit guarantee payments. We also assume that, being welfare-maximizing, the government recapitalizes the bank during the early stage of the bank run. When decisions concerning deposit guarantee payments are made, recapitalization costs are already sunk costs, but the partial bank run has reduced the coverage costs that the remaining deposits might cause for the government. In this way, the depositors who withdraw funds during a partial bank run decrease the danger of a deposit guarantee failure and increase the incentives of the remaining depositors to keep their deposits in the bank. We apply our framework to the European Deposit Insurance Scheme (EDIS), and we view the reliability of the Single Resolution Fund and its backstop as the counterpart to the reliability of the government's promises. It turns out that in an asymmetric shock that affects only a single eurozone country, the EDIS improves bank stability, but its effects might be ambiguous in a systemic crisis that affects the whole Banking Union.
  • Haajanen, Jyrki (2016)
    Bank of Finland. Bulletin 2/2016
    In November 2015, the European Commission proposed that a new European Deposit Insurance Scheme be established. The new scheme was to be launched at the beginning of 2017 and the reform include an 8-year transitional period. During this period the responsibility for pay-outs was to gradually be transferred from national level to the European Deposit Insurance Scheme by 2024.
  • Haajanen, Jyrki (2016)
    Euro & talous 2/2016
    Euroopan komissio esitti marraskuussa 2015 uuden eurooppalaisen talletussuojajärjestelmän perustamista. Uusi talletussuojajärjestelmä aloittaisi toimintansa vuoden 2017 alusta, ja uudistukseen sisältyisi 8 vuoden siirtymävaihe. Sen aikana vastuu talletusten korvaamisesta siirtyisi vaiheittain kansalliselta tasolta eurooppalaiselle talletussuojajärjestelmälle vuoteen 2024 mennessä.