Global Trends in Deposit Insurance Coverage Ratios

Van Roosebeke, Bert and Defina, Ryan (2023): Global Trends in Deposit Insurance Coverage Ratios. Published in: International Association of Deposit Insurers Policy Brief No. 9

Abstract

Given renewed attention on the level of deposit insurance coverage and the risks associated with high shares of uninsured deposits, this paper provides context by analysing global trends in deposit insurance coverage ratios, and explores how they have evolved over time. The analysis is conducted both at the aggregate level and per income classification of jurisdictions covering approximately 80 deposit insurance systems.

The current status of deposit insurance coverage globally:

• As for the share of accounts or depositors fully insured by deposit insurance, we find no substantial difference in ratios across jurisdictions’ income classification. This confirms that deposit insurers across the world fully cover a very high share of accounts/depositors.

• In almost half of jurisdictions, deposit insurance coverage levels are set at around twice the GDP/capita value (±1 point). Coverage levels are markedly higher (lower) in upper middle income (low income) jurisdictions.

• Globally, slightly more than half the value of eligible deposits are not insured by deposit insurance. The same goes for slightly over 60% of total deposits. Coverage levels tend to increase with the affluence of economies. In high income jurisdictions, more than half of deposit value is insured on average. In lower middle-income jurisdictions, coverage ratios are distinctly lower for total deposits (26%).

Since 2015 we have identified the following trends in global coverage:

• Overall coverage of eligible deposits has decreased by 13%, almost double the decline in the coverage ratio of total deposits (7%). This trend is driven by declining coverage in high income and upper middle-income jurisdictions. Coverage in high income jurisdictions has fallen steadily since 2015.

• Most of this decrease can be attributed to the year 2021. During this year, coverage ratios globally fell by 9.8%. The decline was particularly high in upper middle-income jurisdictions (-13.7%).

• The upturn in inflation, limited numbers of deposit insurers that have increased nominal coverage levels in the past years, and fast-growing retail deposits during the COVID-19 pandemic may contribute to explaining this decline in coverage ratios.

• The ranking of coverage ratios by jurisdiction income has been stable over the past eight years.

With new global data on coverage ratios available by the end of 2023, it remains to be seen how declining coverage ratios have evolved more recently. In the recent past, the pandemic’s impact on deposit growth has likely been subdued, but elevated inflation may in part have counteracted this.

• Item Type: MPRA Paper
• Language: English
• Keywords: deposit insurance; bank resolution
• 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). How Inflation impacts Deposit Insurance. Real Coverage and Coverage Ratio. International Association of Deposit Insurer Policy Brief No. 6.