Patrick Honohan
- Published in print:
- 2008
- Published Online:
- August 2013
- ISBN:
- 9780262042543
- eISBN:
- 9780262271462
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262042543.003.0010
- Subject:
- Economics and Finance, Econometrics
This chapter turns to the Chinese banking environment and how China has been responding to the huge loan losses and the growing scale of bank deposits. These scores suggest a worsening of moral ...
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This chapter turns to the Chinese banking environment and how China has been responding to the huge loan losses and the growing scale of bank deposits. These scores suggest a worsening of moral hazard and the possibility that the preconditions for deposit insurance to improve bank soundness are not present. Small depositors in China, however, have not been left unprotected, even despite the fact that a formal system of depositor protection has not yet been established. The chapter then looks at China’s more recent experience and how the government’s role in Chinese banking system has been evolving. Furthermore, the chapter discusses how despite a formal system, China’s depositors remain protected in other ways. Finally, new deposit insurance schemes are suggested that have previously garnered positive results and even guided past rescues.Less
This chapter turns to the Chinese banking environment and how China has been responding to the huge loan losses and the growing scale of bank deposits. These scores suggest a worsening of moral hazard and the possibility that the preconditions for deposit insurance to improve bank soundness are not present. Small depositors in China, however, have not been left unprotected, even despite the fact that a formal system of depositor protection has not yet been established. The chapter then looks at China’s more recent experience and how the government’s role in Chinese banking system has been evolving. Furthermore, the chapter discusses how despite a formal system, China’s depositors remain protected in other ways. Finally, new deposit insurance schemes are suggested that have previously garnered positive results and even guided past rescues.
Gary B. Gorton and Ellis W. Tallman
- Published in print:
- 2018
- Published Online:
- May 2019
- ISBN:
- 9780226479514
- eISBN:
- 9780226479651
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226479651.003.0008
- Subject:
- Economics and Finance, Macro- and Monetary Economics
During the crisis depositors changed their beliefs from run on the bank to not run on the bank. The timing of events during a crisis was very consistent. At the start the clearing house took actions ...
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During the crisis depositors changed their beliefs from run on the bank to not run on the bank. The timing of events during a crisis was very consistent. At the start the clearing house took actions to protect the banking system. During the crisis, gold was imported and clearing house surplus reserves increased. These developments changed depositors' beliefs about the solvency of the banking system.Less
During the crisis depositors changed their beliefs from run on the bank to not run on the bank. The timing of events during a crisis was very consistent. At the start the clearing house took actions to protect the banking system. During the crisis, gold was imported and clearing house surplus reserves increased. These developments changed depositors' beliefs about the solvency of the banking system.
Asli Demirguc-Kunt, Edward J. Kane, and Luc Laeven (eds)
- Published in print:
- 2008
- Published Online:
- August 2013
- ISBN:
- 9780262042543
- eISBN:
- 9780262271462
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262042543.001.0001
- Subject:
- Economics and Finance, Econometrics
Explicit deposit insurance (DI) is widely held to be a crucial element of modern financial safety nets. For this reason, establishing a DI system is frequently recommended by outside experts to ...
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Explicit deposit insurance (DI) is widely held to be a crucial element of modern financial safety nets. For this reason, establishing a DI system is frequently recommended by outside experts to countries undergoing reform. Predictably, DI systems have proliferated in the developing world. The number of countries offering explicit deposit guarantees rose from twenty in 1980 to eighty-seven by the end of 2003. This book challenges the wisdom of encouraging countries to adopt DI without first repairing observable weaknesses in their institutional environment. The evidence and analysis presented confirm that many countries would do well to delay the installation of a DI system. Analysis shows that many existing DI systems are not adequately designed to control possible DI-induced risk taking by financial institutions, and the book provides advice on principles of good design for those countries in the process of adopting or reforming their DI systems. Empirical evidence on the efficiency of real-world DI systems has been scarce, and analysis has focused on the experience of developed countries. The contributors to this book draw on an original cross-country dataset on DI systems and design features to examine the impact of DI on banking behavior and assess the policy complications that emerge in developing countries. Chapters covers decisions about DI adoption, design, and pricing, and review individual country experiences with DI—including issues raised by the EU’s DI directive, banking reform in Russia, and policy efforts to protect depositors in China.Less
Explicit deposit insurance (DI) is widely held to be a crucial element of modern financial safety nets. For this reason, establishing a DI system is frequently recommended by outside experts to countries undergoing reform. Predictably, DI systems have proliferated in the developing world. The number of countries offering explicit deposit guarantees rose from twenty in 1980 to eighty-seven by the end of 2003. This book challenges the wisdom of encouraging countries to adopt DI without first repairing observable weaknesses in their institutional environment. The evidence and analysis presented confirm that many countries would do well to delay the installation of a DI system. Analysis shows that many existing DI systems are not adequately designed to control possible DI-induced risk taking by financial institutions, and the book provides advice on principles of good design for those countries in the process of adopting or reforming their DI systems. Empirical evidence on the efficiency of real-world DI systems has been scarce, and analysis has focused on the experience of developed countries. The contributors to this book draw on an original cross-country dataset on DI systems and design features to examine the impact of DI on banking behavior and assess the policy complications that emerge in developing countries. Chapters covers decisions about DI adoption, design, and pricing, and review individual country experiences with DI—including issues raised by the EU’s DI directive, banking reform in Russia, and policy efforts to protect depositors in China.
Ranald C. Michie
- Published in print:
- 2016
- Published Online:
- December 2016
- ISBN:
- 9780198727361
- eISBN:
- 9780191793516
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198727361.003.0010
- Subject:
- Business and Management, Business History, Finance, Accounting, and Banking
Northern Rock, a small building society converted to a bank in 1997, lent aggressively, repackaging the loans as securities, selling them to investors, using the proceeds to make more loans. In 2007 ...
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Northern Rock, a small building society converted to a bank in 1997, lent aggressively, repackaging the loans as securities, selling them to investors, using the proceeds to make more loans. In 2007 it was unable to re-finance its lending commitments and meet withdrawals. When depositors knew the bank was in financial difficulty, they panicked. Since 1997, no institution had prime responsibility to intervene so as to prevent the problems at one bank destabilizing the entire banking system. The government was forced to intervene to guarantee the savings of all depositors. These problems were symptoms of the general risk-taking within the British banking system, further exposed in 2008 among the building societies that had converted into banks and then the two Scottish banks. The Bank of England intervened, helped by the experience gained in 2007. Overall responsibility for the British banking system was then restored to the Bank of England.Less
Northern Rock, a small building society converted to a bank in 1997, lent aggressively, repackaging the loans as securities, selling them to investors, using the proceeds to make more loans. In 2007 it was unable to re-finance its lending commitments and meet withdrawals. When depositors knew the bank was in financial difficulty, they panicked. Since 1997, no institution had prime responsibility to intervene so as to prevent the problems at one bank destabilizing the entire banking system. The government was forced to intervene to guarantee the savings of all depositors. These problems were symptoms of the general risk-taking within the British banking system, further exposed in 2008 among the building societies that had converted into banks and then the two Scottish banks. The Bank of England intervened, helped by the experience gained in 2007. Overall responsibility for the British banking system was then restored to the Bank of England.
Dalvinder Singh
- Published in print:
- 2020
- Published Online:
- June 2020
- ISBN:
- 9780198844754
- eISBN:
- 9780191891786
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198844754.003.0007
- Subject:
- Law, Company and Commercial Law
This chapter assesses the link between insolvency and liquidation, focusing on the orderly protection of depositors. There are differences in approach to safeguard the public interest at the regional ...
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This chapter assesses the link between insolvency and liquidation, focusing on the orderly protection of depositors. There are differences in approach to safeguard the public interest at the regional and domestic levels. The misalignment of domestic insolvency-liquidation law and depositor protection mandates is likely to lead to wider techniques being needed to effectuate an orderly insolvency-liquidation proceeding and payout to banks’ depositors. This means the competent authority, the resolution authority, and the management of the bank, or administrator-liquidator will need to coordinate their responsibilities through a court-based process during the timeframe of failing or likely to fail to achieve an orderly payout to depositors. The potential coordination risks would need to be factored into the process of a failing or likely-to-fail timeframe.Less
This chapter assesses the link between insolvency and liquidation, focusing on the orderly protection of depositors. There are differences in approach to safeguard the public interest at the regional and domestic levels. The misalignment of domestic insolvency-liquidation law and depositor protection mandates is likely to lead to wider techniques being needed to effectuate an orderly insolvency-liquidation proceeding and payout to banks’ depositors. This means the competent authority, the resolution authority, and the management of the bank, or administrator-liquidator will need to coordinate their responsibilities through a court-based process during the timeframe of failing or likely to fail to achieve an orderly payout to depositors. The potential coordination risks would need to be factored into the process of a failing or likely-to-fail timeframe.
