Bank capital, liquidity creation and deposit insurance

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Nimeke: Bank capital, liquidity creation and deposit insurance
Tekijä: Fungáčová, Zuzana ; Weill, Laurent ; Zhou, Mingming
Julkaisija: Bank of Finland
Osasto / Yksikkö: Institute for Economies in Transition (BOFIT)
Sarjan nimi: BOFIT Discussion Papers
Sarjan numero: 17/2010
Julkaisuvuosi: 2010
Ilmestymispäivämäärä: 5.11.2010
Julkaisuhuomatus: Published in Journal of Financial Services Research, 51(1), 2017: 97-123
Sivumäärä: 37 s.
Hakusanat: talletussuoja; likviditeetti; pankkitoiminta; pääoma; Venäjä; Bofit-kokoelma
JEL: G21; G28; G38; P30; P50
Tiivistelmä: This paper examines how the introduction of deposit insurance influences the relationship between bank cap-ital and liquidity creation. As discussed by Berger and Bouwman (2009), there are two competing hypothes-es on this relationship which can be influenced by the presence of deposit insurance. The introduction of a deposit insurance scheme in an emerging market, Russia, provides a natural experiment to investigate this issue. We study three alternative measures of bank liquidity creation and perform estimations on a large set of Russian banks. Our findings suggest that the introduction of the deposit insurance scheme exerts a limited impact on the relationship between bank capital and liquidity creation and does not change the negative sign of the relationship. The implication is that better capitalized banks tend to create less liquidity, which sup-ports the "financial fragility/crowding-out" hypothesis. This conclusion has important policy implications for emerging countries as it suggests that bank capital requirements implemented to support financial stability may harm liquidity creation. JEL classification: G21; G28; G38; P30; P50 Keywords: Bank capital, liquidity creation, deposit insurance, Russia
Tekijänoikeustiedot: https://helda.helsinki.fi/bof/copyright


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