Bank capital, liquidity creation and deposit insurance

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dc.contributor Bank of Finland Fungáčová, Zuzana Weill, Laurent Zhou, Mingming 2010-09-22T08:00:00Z 2014-09-22T08:00:00Z 2010
dc.identifier.isbn 978-952-462-692-7
dc.identifier.issn 1456-5889
dc.description.abstract 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
dc.format.extent 37 s.
dc.language.iso eng
dc.relation.ispartofseries BOFIT Discussion Papers
dc.subject talletussuoja
dc.subject likviditeetti
dc.subject pankkitoiminta
dc.subject pääoma
dc.subject Venäjä
dc.subject SP
dc.subject RP
dc.subject RP ST
dc.subject Bofit-kokoelma
dc.title Bank capital, liquidity creation and deposit insurance
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-201408071906
dc.subject.jel G21
dc.subject.jel G28
dc.subject.jel G38
dc.subject.jel P30
dc.subject.jel P50 BOFIT Discussion Papers
dc.series.year 2010
dc.series.number 17/2010
dc.series.sortingnumber 17 5.11.2010
dc.identifier.doi 10.1007/s10693-016-0240-7
dc.contributor.orgunit Institute for Economies in Transition (BOFIT)
dc.description.publication Published in Journal of Financial Services Research, 51(1), 2017: 97-123

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