Chernykh, Lucy and Rebel, Cole (2009): Does Deposit Insurance Improve Financial Intermediation? Evidence from the Russian Experiment. Published in: Journal of Banking and Finance , Vol. 2, No. 35 (February 2011): pp. 388-402.
This is the latest version of this item.
Download (344kB) | Preview
This study examines how the introduction of deposit insurance affects depositors and banks, using the deposit-insurance scheme introduced into the Russian banking system as a natural experiment. The fundamental research question is whether the introduction of deposit insurance leads to a more effective banking system as evidenced by increased deposit-taking and decreased reliance upon State-owned banks as custodians of retail deposits. We find that banks entering the new deposit-insurance system increase both their level of retail deposits and their ratios of retail deposits to total assets relative to banks that do not enter the new deposit insurance system. These results hold up in a multivariate panel-data analysis that controls for bank- and time- random effects. The longer a bank has been entered into the deposit insurance system, the greater is its level of deposits and its ratio of deposits to assets. Moreover, this effect is stronger for regional banks and for smaller banks. We also find that implementation of the new deposit-insurance system has the effect of ―leveling the playing field‖ between State-owned banks and privately owned banks. Finally, we find strong evidence of moral hazard following implementation of deposit insurance in the form of increased bank risk-taking. Financial risk and, to a lesser degree, operating risk increase following implementation.
|Item Type:||MPRA Paper|
|Original Title:||Does Deposit Insurance Improve Financial Intermediation? Evidence from the Russian Experiment|
|Keywords:||bank; deposit insurance; financial intermediation; moral hazard; Russia; State-owned bank|
|Subjects:||E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Prof. Rebel Cole|
|Date Deposited:||04. Mar 2011 19:11|
|Last Modified:||19. Feb 2013 06:58|
Allen, F., Gale, D., 1998. Optimal financial crises. The Journal of Finance 53, 1245-1284.
Allen, F., Santomero, A., 1997. The theory of financial intermediation. Journal of Banking and Finance 21, 1461-1486.
Angkinand, A., 2009. Banking regulation and the output cost of banking crises. Journal of International Financial Markets, Institutions & Money 19, 240–257.
Barth, J., Caprio, G., Nolle, D., 2004. Comparative international characteristics of banking. Economic and Policy Analysis working paper 2004-01.
Barth, J., Caprio, G., Levine, R., 2001. The regulation and supervision of banks around the world: A new database. World Bank Policy Research working paper, No. 2588.
Barth, J., Caprio, G., Levine, R., 2004. Bank regulation and supervision: What works best? Journal of Financial Intermediation 13, 205-248.
Berkman, H., Cole, R., Fu, L., 2009. Expropriation through loan guarantees to related parties: Evidence from China. Journal of Banking and Finance 33, 141-156
Bhattacharya, S., Boot, A., Thakor, A., 1998. The economics of bank regulation. Journal of Money, Credit and Banking 30, 745-770.
Brown, M., Maurer, M., Pak, T., Tynaev, N., 2009. The impact of banking sector reform in a transition economy: Evidence from Kyrgyzstan. Journal of Banking and Finance 33, 1677-1687.
Calomiris, C., 1996. Building an incentive-compatible safety net: Special problems for developing countries. Columbia University working paper.
Calomiris, C., White, E., 1994. The origins of federal deposit insurance. In: Goldin. C., Libecap, G.(Eds.), The Regulated Economy: A Historical Approach to Political Economy. Chicago: University of Chicago Press, 145-188.
Chari, V., Jagannathan, R., 1988. Banking panics, information, and rational expectations equilibrium. The Journal of Finance 43, 749-761.
Cole, R., Moshirian, F., Wu, Q., 2008. Bank stock returns and economic growth. Journal of Banking and Finance 32, 996-1007.
Cull, R., Senbet, L., Sorge, M., 2005. Deposit insurance and financial development. Journal of Money, Credit and Banking 37, 43-82.
Demirguc-Kunt, A., Detragiache, E., 2002. Does deposit insurance increase banking system stability? An empirical investigation. Journal of Monetary Economics 49, 1272-1406. Demirgüç-Kunt, A., Huizinga, H., 2004. Market discipline and deposit insurance. Journal of Monetary Economics 51, 375-399.
Demirguc-Kunt, A., Kane. E., Laeven, L., 2006. Determinants of deposit-insurance adoption and design. World Bank Policy Research working paper No. 3849.
Demirgüç-Kunt, A., and Sobaci, T., 2001. A new development database: Deposit insurance around the world. World Bank Economic Review 15, 481-490.
Diamond, D. Dybvig, P., 1983. Bank runs, deposit insurance and liquidity. Journal of Political Economy 91, 401-419.
Duan, J., Moreau, A., Sealey, S., 1992. Fixed-rate deposit insurance and risk-shifting behavior at commercial banks. Journal of Banking and Finance 16, 715-742.
Fu, X., Heffernan, S., 2009. The effects of reform on China's bank structure and performance. Journal of Banking and Finance 33, 39-52.
Gonzales, F., 2005. Bank regulation and risk-taking incentives: An international comparison of bank risk. Journal of Banking and Finance 29, 1153-84.
Gropp, R., Vesala, J., 2004. Deposit insurance, moral hazard and market monitoring. Review of Finance 8, 571-602.
Gueyie, J., Lai, V., 2003. Bank moral hazard and the introduction of official deposit insurance in Canada. International Review of Economics and Finance 12, 247-273.
Honohan, P., Klingebiel, D., 2003. The fiscal cost implications of an accommodating approach to banking crises. Journal of Banking and Finance 27, 1539-1560.
Hovakimian, A., Kane, E., Laeven, L., 2003. How country and safety-net characteristics affect bank risk-shifting. Journal of Financial Services Research 23, 177-204.
Kane, E., 1995. Three paradigms for the role of capitalization requirements in insured financial institutions. Journal of Banking and Finance 19, 431-459.
Kane, E., 2000. Designing financial safety nets to fit country circumstances. World Bank Policy Research working paper No. 2453.
Kane, E., Klingebiel, D., 2004. Alternatives to blanket guarantees for containing a systemic crisis. Journal of Financial Stability 1, 31-63.
King, R., Levine, R., 1993. Finance and growth: Schumpeter might be right. Quarterly Journal of Economics 108, 717-738.
Koutsomanoli-Filippaki, A., Margaritis, D., Staikouras, C., 2009. Efficiency and productivity growth in the banking industry of Central and Eastern Europe. Journal of Banking and Finance 33, 557-567
La Porta, R., Lopes-de-Silanes, F., Shleifer, A., 2002. Government ownership of banks. The Journal of Finance 57, 265-300.
Laeven, L., 2002. Bank risk and deposit insurance. World Bank Economic Review 16, 109- 137.
Laeven, L., 2004. The political economy of deposit insurance. Journal of Financial Services Research 26, 201-224.
Levine, R., 2004. Finance and growth: Theory, evidence, and mechanisms. NBER working paper No. 10776.
Männasoo, K., D. Mayes, D., 2009. Explaining bank distress in Eastern European transition economies. Journal of Banking and Finance 33, 244–253
Merton, R., 1977. An analytical derivation of the cost of deposit insurance and loan guarantees. Journal of Banking and Finance 1, 3-11.
Mondschean, T., Opiela, T., 1999. Bank time deposit rates and market discipline in Poland: The impact of State ownership and deposit insurance reform. Journal of Financial Services Research 15, 179 – 196.
Ronn, E., and A. Verma, A., 1986. Pricing risk-adjusted deposit insurance: An option-based model. The Journal of Finance 41, 871-895.
Tompson, W., 2004. Banking reform in Russia: Problems and prospects. OECD Economics Department Working Papers No. 410, OECD Publishing.
Available Versions of this Item
Does Deposit Insurance Improve Financial Intermediation? Evidence from the Russian Experiment. (deposited 25. Jan 2009 05:40)
Does Deposit Insurance Improve Financial Intermediation? Evidence from the Russian Experiment. (deposited 30. Aug 2010 00:44)
- Does Deposit Insurance Improve Financial Intermediation? Evidence from the Russian Experiment. (deposited 04. Mar 2011 19:11) [Currently Displayed]
- Does Deposit Insurance Improve Financial Intermediation? Evidence from the Russian Experiment. (deposited 30. Aug 2010 00:44)