COVID-19 and Deposit Insurer Fund Sizes

Bert, Van Roosebeke and Ryan, Defina (2022): COVID-19 and Deposit Insurer Fund Sizes. Published in: International Association of Deposit Insurers Survey Brief

Abstract

Using IADI Annual Survey data, we find some evidence that deposit insurers in jurisdictions with particularly high deposit inflow during the pandemic tend to see their relative fund size decrease i.e. their absolute fund size grew at a slower pace than deposits. As this refers to annual data, lags in premium collection are unlikely to explain this in full and accommodative premium policies may contribute to this observation.

At a quarterly level, and using weighted average relative fund sizes, we find that – globally – fund sizes relative to covered deposits have expanded throughout the pandemic, interrupted by a small decrease during 2021Q1 only. Given the overall growth of deposits during the pandemic, this is noteworthy. Over the 12-month period 2020Q2-2021Q2, we find an accumulated relative fund size increase of 2.6%. Europe and Asia witness high growth of about 10%, whereas the Americas see fund size decrease by 2%.

Interpretation of quarterly data suggests that relative fund sizes in advanced economies have grown proportionately slower than in emerging economies. Whether this can be attributed to a larger and more sudden inflow in covered deposits in these economies (as annual data suggests) and/or to accommodative policies, remains to be investigated.

Looking at future trends in deposits, 40% of survey respondents expect covered deposits to grow at approximately the same rate same as in the last five years. Of the 60% expecting an adjustment in growth into 2022, roughly half expected growth to exceed average historical levels.

• Item Type: MPRA Paper
• Language: English
• Keywords: deposit insurance; bank resolution; COVID-19
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G3 - Corporate Finance and Governance > G33 - Bankruptcy ; Liquidation

References

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Van Roosebeke, B., Defina, R. (2022a). Deposit Insurance in 2022: Global Trends and Key Emerging Issues. International Association of Deposit Insurers publication.

Van Roosebeke, B., Defina, R. (2022b). COVID-19 and Covered Deposits. International Association of Deposit Insurers, Survey Brief No. 2.