The National Deposit Insurance System: A Market Institution at the Crossroads Cover Image

The National Deposit Insurance System: A Market Institution at the Crossroads
The National Deposit Insurance System: A Market Institution at the Crossroads

Author(s): Antoneta Geala
Subject(s): Economy, Financial Markets
Published by: EDITURA ASE
Keywords: deposit insurance; liquidity; solvency; moral hazard; lender of last resort; funding mechanism;

Summary/Abstract: The safety net provided by deposit insurance systems gain heavily in weight at times of crisis. The correct set of such a cushion is critical to its effectiveness. While it helps to prevent bank runs, the severe market distortions are of great concern. The short term benefit of public confidence can be, far and away, offset by its long run negative effects consisting mainly in increased moral hazard, heavy public costs and impaired competition.

  • Issue Year: 1/2009
  • Issue No: 1
  • Page Range: 55-68
  • Page Count: 14
  • Language: English