This paper provides a novel rationale for why banks combine lending and deposit taking. Contrary to existing work, it shows that demand deposits commit banks to monitoring even if deposit insurance is implemented. Investors with liquidity needs withdraw their deposits early and are not willing...

The present study undertakes an overview of the role of deposit guarantee schemes (DGSs) within the banking crisis management framework. It is structured in four Section:Section 1 discusses the policy objectives of DGSs, namely the protection of depositors and the contribution to the stability...

There is a considerable debate on the role played by deposit insurance on market discipline in the banking industry. Using data for 203 banks across 10 Central and Eastern European countries, this paper empirically analyzes the implications of the implementation of explicit deposit insurance...

Using administrative data on deposits and loans of every Norwegian with every Norwegian bank, we show that an existing deposit account makes a household more likely to hold deposits at the same bank later despite better alternatives and more likely to borrow there. Consistent with this, banks...

Asset recovery rate is a key factor for credit investors. This study explores the determinants of bank asset recovery rates during the recent downturn in the real estate sector and subsequent financial crisis. We find that banks relying on brokered deposit realize lower asset recovery rates....

Combining deposit taking with credit line provision saves on the liquidity costs banks incur to meet the liquidity needs of consumers and corporations, but it exposes them to a risk of concurrent runs on their assets and liabilities. If a bank's financial condition deteriorates, depositors have...

Using evidence from Russia, we explore the effect of the introduction of deposit insurance on bank risk. Drawing on variation in the ratio of firm deposits to total household and firm deposits before the announcement of deposit insurance, so as to capture the magnitude of the decrease in market...

Prior to the Great Depression, regulators imposed double liability on bank shareholders to ensure financial stability and protect depositors. Under double liability, shareholders of failing banks lost their initial investment and had to pay up to the par value of the stock in order to compensate...

I study the relation between shadow banking and financial stability in an economy in which banks are susceptible to self-fulfilling runs and in which government-backed deposit insurance is limited. Shadow banks issue only uninsured deposits while commercial banks issue both insured and uninsured...

In the aftermath of a financial crisis, policymakers often must determine how best to trade off future security from a similar crisis and future moral hazard. The more the government pledges to protect the value of the assets of financial institutions in a crisis, the greater the risks that...