Deposit Insurance & Banking System Stability
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University Of Birmingham Department of Economics MSc Money Banking & Finance 2004/2005 Topics in Money Banking & Finance Deposit Insurance & Banking System Stability 15th March 2005 Abstract: The aim of this study is to examine if there is a link between Deposit Insurance, Bank Stability, Risk Taking and Moral Hazards. Starting with examination of Deposit Insurance around the world and then moving onto the EU. It is found that Deposit Insurance alone can not provide Bank Stability but requires the support of mature banking regulations, supervision, credibility and strong contracting environments in order to successfully provide Bank stability. However it is found that where there is weak provision of the points highlighted above Explicit Deposit Insurance tends to increase Moral hazard, Risk Taking which then affects the Stability of Banks and vice versa when all points are catered for. Introduction: Over recent time-periods financial instability caused through systematic banking crises has affected not only developing but...


