(A Study on Deposit Insurance Coverage and Market Discipline)

2017 ◽  
Author(s):  
Jinho Lee ◽  
Hyunjae Jung ◽  
Kang Baek ◽  
Young Seog Park
Keyword(s):  
Deposit Insurance ◽  
Insurance Coverage ◽  
Market Discipline

scholarly journals Do Depositors Punish Banks for Bad Behavior? Market Discipline, Deposit Insurance, and Banking Crises

2001 ◽  
Vol 56 (3) ◽  
pp. 1029-1051 ◽  
Author(s):  
Maria Soledad Martinez Peria ◽  
Sergio L. Schmukler
Keyword(s):  
Deposit Insurance ◽  
Banking Crises ◽  
Market Discipline

scholarly journals Banks’ Internal Capital Markets and Deposit Rates

2017 ◽  
Vol 52 (5) ◽  
pp. 1797-1826 ◽  
Author(s):  
Itzhak Ben-David ◽  
Ajay Palvia ◽  
Chester Spatt
Keyword(s):  
Capital Markets ◽  
Deposit Insurance ◽  
Causal Effect ◽  
Market Discipline ◽  
Internal Capital Markets ◽  
Capital Regulation ◽  
Rate Data ◽  
Alternative Perspective ◽  
Internal Capital ◽  
Loan Growth

It is commonly believed that deposit rates are determined primarily by supply: Depositors require higher deposit rates from risky banks, thereby creating market discipline. An alternative perspective is that market discipline is limited (e.g., due to deposit insurance and/or enhanced capital regulation) and that internal demand for funding by banks determines rates. Using branch-level deposit rate data, we find little evidence for market discipline as rates are similar across bank capitalization levels. In contrast, banks’ loan growth has a causal effect on deposit rates; for example, branches’ deposit rates are correlated with loan growth in other states in which their bank has some presence, suggesting internal capital markets help reallocate the bank’s funding.

scholarly journals Market discipline and deposit insurance: evidence from some Middle Eastern banks

2008 ◽  
Vol 6 (1-2) ◽  
pp. 278-285 ◽  
Author(s):  
Ghassan Omet ◽  
Saif Ibrahim ◽  
Hadeel Yaseen
Keyword(s):  
Financial Institutions ◽  
Deposit Insurance ◽  
Middle Eastern ◽  
Banking Crises ◽  
Market Discipline ◽  
Financial Intermediaries ◽  
Basel Accord ◽  
Effective Governance ◽  
Time Period ◽  
Bank Disclosure

Financial intermediaries (banks) and market (stock markets) can play an important role in economic growth. They facilitate a more efficient mobilization of savings, spread risk, and provide liquidity. Given the high costs of banking crises, regulators have always sought the means that promote greater levels of prudence in the behaviour of banks. Indeed Pillar 3 of the Basel Accord relies on enhancing bank disclosure to strengthen market discipline. In other words, Basel II introduces mechanisms to ensure effective governance in financial institutions. The primary objectives of this research are to provide answers to two questions. First, do depositors discipline Jordanian, Kuwaiti, Omani, and Saudi banks? Second, the fact that the Kuwaiti and Saudi deposits are 100 percent insured explicitly and implicitly respectively, while the Jordanian and Omani deposits are insured up to $14,000 and $50,000 respectively, does this difference in the deposit insurance design have any bearing on market discipline. Based on a sample of listed Jordanian, Kuwaiti, Omani, and Saudi banks during the time period 1997 – 2006, the overall results clearly indicate the absence of market discipline in Kuwait, Oman, and Saudi Arabia. In other words, market discipline is at work only in Jordan.

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