The Travels of a Bank Deposit in Turbulent Times: The Importance of Deposit Insurance Design for Cross-Border Deposits

Shusen Qi, S. Kleimeier, Harald Sander*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We examine the impact of the existence on an explicit deposit insurance (DI) scheme and its design features on bilateral cross‐border deposits (CBD) in a gravity model setting. We find that both the absolute quality of a country's DI and its relative quality vis‐à‐vis other countries' DI generally affect depositor behavior. However, during systemic banking crises, cross‐border depositors primarily seek countries with the best DI schemes. Similarly, during the 2008–2009 great financial crisis, the emergency actions taken by the governments, which supply and maintain these safe havens, have led to substantial relocations of CBD.
Original languageEnglish
Pages (from-to)980-997
Number of pages18
JournalEconomic Inquiry
Volume58
Issue number2
DOIs
Publication statusPublished - Apr 2020

Keywords

  • deposit insurance
  • cross-border deposits
  • banking crisis
  • safe haven
  • regulatory arbitrage

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