Determinants of deposit-insurance adoption and design

This paper identifies factors that influence decisions about a country's financial safety net, using a comprehensive data set covering 180 countries during the 1960–2003 period. Our analysis focuses on how private interest-group pressures, outside influences, and political-institutional factors...

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Bibliographic Details
Published in:Journal of financial intermediation 2008-07, Vol.17 (3), p.407-438
Main Authors: Demirgüç-Kunt, Asli, Kane, Edward J., Laeven, Luc
Format: Article
Language:English
Subjects:
Bank regulation
Banking system
Banks
Deposit insurance
Deposit insurance Bank regulation Political economy Institutions
Economic theory
Financial institutions
Financial Institutions and Services: Government Policy and Regulation G280
Financial regulation
Institutions
Manycountries
Micro Finance Institutions
Mortgages G210
Other Depository Institutions
Political economy
Regulation of financial institutions
Studies
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Summary:This paper identifies factors that influence decisions about a country's financial safety net, using a comprehensive data set covering 180 countries during the 1960–2003 period. Our analysis focuses on how private interest-group pressures, outside influences, and political-institutional factors affect deposit-insurance adoption and design. Controlling for macroeconomic shocks, quality of bank regulations, and institutional development, we find that both private and public interests, as well as outside pressure to emulate developed-country regulatory schemes, can explain the timing of adoption decisions and the rigor of loss-control arrangements. Controlling for other factors, political systems that facilitate intersectoral power sharing dispose a country toward design features that accommodate risk-shifting by banks.
ISSN:1042-9573
1096-0473
DOI:10.1016/j.jfi.2007.03.009