Deposit Insurance

Part 1 Banks and deposit insurance: banks as special firms; bank runs and their costs; bank failure and runs to other banks - the case for deposit insurance; deposit insurance in a financial framework - deposit insurance, lender or last resort and deposit insurance. Part 2 The rationale for deposit insurance: deposit insurance and banking panics models - non-fundamental theory, fundamental theory; systemic risk as source of financial instability - banks and the payment system, the magnitude of systemic risk; the successful experience of clearinghouse associations. Part 3 The deposit insurance dilemma: the moral hazard problem - moral hazard toward risky assets, moral hazard towards capital adequacy; the social cost of moral hazard; regulation and supervision as responses to deposit insurance; implicit insurance. Part 4 Coping with deposit insurance perverse effects: optimal deposit insurance design - pricing risk-adjusted deposit insurance, the cases against pricing insurance, macroeconomics issues on risk-adjusted deposit insurance; market discipline solutions - sized based deposit insurance, maturity based partial deposit insurance, closure rule; increased disclosure; risk-based capital; radical alternatives - private deposit insurance, the narrow banks. Part 5 Comparative analysis of deposit insurance schemes: Non-European countries - United States, Canada, Japan; EEC countries - United Kingdom, Italy, France, West Germany, other EEC countries - Holland, Belgium, Spain.