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.
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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:||08 Feb 2016 13:17|
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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)