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We estimate a proposed core financial intermediation model built upon an extended classical quantity theory using Bayesian econometric techniques. The findings suggest that the persistent deceleration in bank deposits, bank credit and domestic final output during the most of the second half of the decade ending in Dec. 2019 is due to a downward spiral (or a vicious circle) of bank deposits, bank credit and domestic final output caused by a reversal of hitherto accommodative economic and financial policies meant to revitalise the economy following the 2007 post-election disturbances and to check adverse contagion effects from the global economic and financial crises. With accommodative economic and financial policies including relaxed compliance with provisioning for non-performing bank loans, the gross non-performing bank loans accumulated to unprecedented levels thereby adversely affecting effective demand for and supply of bank credit in the private sector. This situation was aggravated by tightening monetary policy stance using the central bank rate amid tighter requirements for compliance with provisioning for non-performing loans.

Bankeinlagen bis 100.000 Euro sind de jure überall im Euroraum gleichermaßen vor Verlusten geschützt. De facto hängt der Wert dieser gesetzlichen Haftungszusage unter anderem von der Ausstattung des nationalen Sicherungsfonds und der relativen Größe des Bankensektors in einer Volkswirtschaft ab. Um die Homogenität des Einlagenschutzes zu gewährleisten und die Bankenunion zu vollenden, bedarf es einer einheitlichen europäischen Einlagensicherung. Die bestehende implizite Risikoteilung im Euroraum ist ordnungspolitisch nicht wünschenswert. Ferner kann eine explizite und glaubwürdige Zweitsicherung Fehlanreize zur Übernahme exzessiver Risiken verhindern, bevor es zum Schadensfall kommt. Daher plädiert dieser Beitrag für ein zweistufiges, streng subsidiär organisiertes Rückversicherungsmodell: Nationale Erstversicherungen würden einen festgeschriebenen Teil, die europäische Rückversicherung nachrangig den Rest der Deckungssumme besichern. Die Rückversicherung gewährt diese Liquiditätshilfen in Form von Kassenkrediten. Weil die Haftung auf nationaler Ebene verbleibt, werden Risiken geteilt aber nicht vergemeinschaftet. Marktgerechte Prämien müssen nicht nur das individuelle Risikogewicht einer Bank sondern auch länderspezifische Risikofaktoren berücksichtigen. Zuletzt braucht der Rückversicherer umfangreiche Aufsichtsrechte, um die Zahlungsfähigkeit der Erstversicherer mit Hinblick auf die nationalen Haftungspflichten jederzeit sicherzustellen.

Den inhaltlichen Schwerpunkt der Mitgliederzeitschrift "BF/M-Spiegel" bilden Berichte über die laufenden Forschungsprojekte sowie die Fachbeiträge zu verschiedenen betriebswirtschaftlichen Disziplinen mit hoher Praxisorientierung. Editorial: Liebe Leserinnen und Leser, das BF/M-Bayreuth befindet sich nunmehr bereits im 40. Jahr nach seiner Gründung. Damit ist das Jahr 2019 natürlich ein Jahr des Rückblicks auf viele Jahre mit informativen Veranstaltungen, spannenden Forschungs- und Industrieprojekten und erfolgreichen Netzwerktätigkeiten. Aktuell konzipieren wir am BF/M-Bayreuth sowohl eine Jubiläumsveranstaltung, die im Herbst stattfinden wird, als auch einen Jubiläumsspiegel, der Sie mit auf eine interessante BF/M-Zeitreise durch die vergangenen vier Jahrzehnte nehmen wird. Wenn auch Sie noch die ein oder andere spannende oder kuriose Anekdote zum BF/M-Bayreuth haben, teilen Sie uns diese gern mit! Um Ihnen die Wartezeit bis dahin zu verkürzen, gibt Ihnen der vorliegende Spiegel, in gewohnter Weise, Einblicke in die Projekte und Veranstaltungen des letzten halben Jahres am BF/M-Bayreuth. Dazu zählen eine Reihe von Veranstaltungen im Rahmen des Projekts „Digitales Gründerzentrum“, aber auch klassische BF/M-Veranstaltungen, wie der German Indian Round Table oder der 6. Oberfränkische Personal- und Praxistag. Diese Ausgabe informiert natürlich auch wieder über die aktuellen Zwischenstände der EU-, bundes- und landesgeförderten Projekte. So konnten etwa die Projekte BeWaB und TeBeVAT2 2018 erfolgreich beendet werden. Gleichzeitig wurden neue Projekte an das BF/M-Bayreuth gebracht, sodass uns die Forschungsarbeit nicht auszugehen droht. Auch das BF/M-Netzwerk wächst weiter. Im letzen halben Jahr konnten wir fünf neue Mitglieder (eyeDsec GmbH, IMB-Institut, Sigmund Hoffmann GmbH, Trevisto AG) sowie zwei neue Kooperationspartner gewinnen. Drei der neuen Mitgliedsunternehmen stellen sich auf den Seiten 32 – 34 vor. Freuen Sie sich auf Seite 36 außerdem auf einen interessanten wissenschaftlichen Beitrag zum Vergütungsmodell „Cafeteria-System“, bei welchem Arbeitnehmer einen Teil ihres Entgelts gegen Leistungen eintauschen können. Wie es in öffentlich-geförderten Forschungsinstituten üblich ist, findet auch am BF/M-Bayreuth ein regelmäßiger Wechsel in der Belegschaft statt. Neben Herausforderungen, die dadurch entstehen, bedeutet jeder neue Mitarbeiter gleichzeitig eine neue Chance und Perspektive, die der Arbeit dem BF/M-Bayreuth zugutekommt. Welche Personalwechsel zuletzt stattfanden, lesen Sie auf Seite 38. Das BF/M-Team wünscht viel Freude bei der Lektüre!

Die vorliegende Dissertation beschäftigt sich mit der Fragestellung wie die Genossenschaftsbanken den Herausforderungen im Rahmen der Einführung des neuen Rahmenwerkes Basel III begegnen werden. Um einen möglichst umfassenden Eindruck der möglichen Konsequenzen der verschärften weltweit etablierten Regelungen im Aufsichtsrecht des Bankensektors zu bekommen, wurde die Sequenzierung als methodisches Konzept gewählt. Die Methodenkombination ist besonders geeignet, da bei der Analyse eines neu etablierten Reglements in Bezug auf konkrete Auswirkungen einschlägige Fachliteratur nur in sehr begrenztem Maße zur Verfügung steht. Die Durchführung von aufeinander aufbauenden empirischen Erhebungen ermöglicht es, zunächst die Erkenntnisse der Leitfaden-gestützten Expertengespräche in die Konzeption des Fragebogens für die Durchführung der breitangelegten Online-Befragung mit einzubeziehen. Daran anschließend konnte auf die im Rahmen dieses quantitativen Ansatzes erzielten Ergebnisse zurückgegriffen werden, um Fallanalysen durchzuführen, deren qualitative Ergebnisse zu einem vertiefenden Verständnis beitragen. Die Analyse aller zur Verfügung stehenden Informationen brachte interessante neue Erkenntnisse, die hier nochmals kurz zusammengefasst aufgezeigt werden: Die Unternehmenskultur der Genossenschaftsbanken basiert auf ihrer speziellen Governancestruktur und der Werteorientierung der traditionellen Rechtsform eingetragene Genossenschaft. Prinzipien wie das Selbsthilfeprinzip oder das Demokratieprinzip und Werte wie der Förderauftrag in Verbindung mit der gelebten Transparenz und der hohen Eigenkapitalquote, konnten als Ursachen für das funktionierende System identifiziert werden. Darüber hinaus ist durch die Institutssicherung nicht nur die rechtlich vorgeschriebene Einlagensicherung sichergestellt. Die Einlagen sind hundertprozentig abgesichert, zudem kann für alle angeschlossenen Unternehmungen der FinanzGruppe ein Insolvenzschutz gewährleistet werden. Dem Einwand, der von Kritikern ins Feld geführt wird, es bestehe stets die Gefahr eines Moral Hazard, kann mit dem Hinweis auf den Abbau von Informationsasymmetrien, der auf die transparente Unternehmensführung zurückzuführen ist, begegnet werden. Die Kommunikation trägt zudem zur Vermittlung der genossenschaftlichen Werte sowie der Grundsätze der Geschäftsführung bei und leistet somit einen Beitrag zur langfristigen Mitglieder- und Kundenbindung. Die Förderung der Mitglieder ist die zentrale Aufgabe von Genossenschaften, welche im Paragraphen 1 des Genossenschaftsgesetzes festgeschrieben ist. Zugleich stellt die Kundenbindung – von Mitgliedern sowie „Nur-Kunden“ – einen wichtigen Aspekt im Hinblick auf die Eigenkapitalgewinnung der Institute dar, die im Kontext der Einführung von Basel III eine immens wichtige Rolle spielt. In diesem Zusammenhang spielen zum einen die klassischen Instrumente der Eigenkapitalgewinnung von Kreditinstituten eine Rolle. Das heißt die Giralgeldschöpfung sowie die Einnahme von Gewinnen durch Zinserträge. Darüber hinaus kann durch die Einlagen der Mitglieder Eigenkapital hinzugewonnen werden. Hierbei muss, wie bereits ausgeführt, beachtet werden, dass Geschäftsanteile an die Person des Mitgliedes gebunden sind, d.h. bei einem Austritt aus der Genossenschaft wird dieser eben jenes Kapital entzogen, da in Genossenschaften kein festes Stammkapital vorgehalten werden muss. Die Einzahlungen, welche die Mitglieder auf die gezeichneten Geschäftsanteile zu leisten haben, bilden das Geschäftsguthaben, also das tatsächlich in Form von liquiden Mitteln zur Verfügung stehende Eigenkapital. Darüber hinaus leistet das geschilderte Verbundsystem mit der DZ BankAG als börsennotiertem Spitzeninstitut einen entscheidenden Beitrag bei der Generierung von Eigenkapital. Ein wichtiges Feld ist in diesem Zusammenhang beispielsweise die Aufnahme von Mezzanine Kapital, was über die DZ Bank AG realisiert werden kann. Die tatsächlich auftretenden Konsequenzen von Basel III für die Kreditgenossenschaften gilt es nun in den nächsten Jahren aufmerksam zu verfolgen. Die Auswirkungen, so legen die Ergebnisse der dieser Arbeit zugrundeliegenden empirischen Erhebungen nahe, werden durch die Genossenschaftsbanken in Deutschland im Allgemeinen gut zu bewältigen sein. In einigen Bereichen werden Anpassungen unumgänglich sein. Dann jedoch sollte die genossenschaftliche FinanzGruppe, die gestärkt aus der vergangen Krise hervorgegangen ist, auch in Zukunft eine wettbewerbsfähige Bankengruppe in der Deutschen Bankenlandschaft darstellen. Die jüngste Krise im Bereich der Finanzwirtschaft hat gezeigt, dass sich die genossenschaftliche FinanzGruppe, mit Ihrem Filialnetz bestehend aus regional verankerten, oftmals kleinstrukturierten Primärbanken bei der Bewältigung der Krise, im Gegensatz zu vielen der global agierenden, systemrelevanten Banken, positiv hervortun konnte. Diese Tatsache sollte bei der Etablierung des neuen regulatorischen Rahmenwerkes Basel III berücksichtig werden. How will German cooperative banks face the dare of the new Basel III framework now and in the future? This cumulative doctoral dissertation should provide an insight into the results to this question. The sequencing as the methodical concept was choosen to establish a profound impression of the possible concequences of the increased worldwide acknowledged requirements within the supervision system of the banking sector. The combination of methods, the sequencing, seemed to be applicative, due to the fact that there is only very limited availability of appropriate literature when analysing specific consequences and impacts of new established standards. During the conception of the questionnaire for the broadly based online survey the choosen methodical approach and the implementation of two consecutive empirical studies enables to fall back to the results of the guided interviews with finance experts. At last case analyses were carried out, refering to the findings of the online survey. Diverse and meaningful results were obtained through the analysis of the availiable data – the results of the interviews and the evaluation of the available secondary literature. The following section will provide a brief résumé of the achived results: The cooperative banks with their unique company culture is based on a specific governance structure and the guidance on values of the traditional legal status registered governance. Certain principals and values were identified as reasons for the efficiently overall system. Of particular interest are the self-help principle and the principle of democracy as well as certain values such as the cooperative mission of promoting the members, transparency and a high equity capital ratio. In addition the cooperative institution guarantee provides more than the legal regulations of deposit protection. It ensures both the bankruptcy protection within the affiliated companies of the FinanzGruppe and the comprehensive protection of all bank client deposits. Certain experts have raised critical objections such as the danger of a Moral Hazards. Those critics can be encountered by indicating to the reduction of the asymmetrie of information, which is based on the transparent corporate management. The communication contributes sharing the important cooperative values and general principles of the executive board as well as it supports a long-term membership and customer loyalty. The co-operative objective to advance and support their members is even fixed in §1 German Cooperatives Act (§1 GenG). At the same time the memberhip itself is an important and reliable aspect regarding the generation of equity capital which plays a central role concerning the introduciton of basel III. Within this context there are for sure common equity instruments like creation of deposit money and interest income. Furthermore the payings of the members are a possibiliy to rise equity capital. With regards to this it has to be noted that the cooperative shares can not be freely transferred, they do belong to a defined person. So if a person quits the cooperative the share capital of the Cooperative will be reduced. Cooperatives are not forced to hold a certain amount of capital stock. The share capital of each member builts the actually available liquid funds of the institutions. In addition the explained combined system with the DZ BankAG as highly quoted credit institution does a significant bit for the generation of equity capital. For instance an important aspect is the sourcing of mezzanine capital at the capital markets which is realized through the DZ BankAG. Within the following years it is recommanded to closely monitor the actual impacts and effects resulting from Basel III. According to this empirical research in general the cooperative banks should be able to cope with the challenges and consequences. Of course adaptions and changes are inevitable in some areas. But concerning to the fact the cooperative banks have quite strengthened during the recent times of crisis it should be safe to say that the cooperative banking group is going to stay a competitive structure within the credit intitutions in Germany. The recent banking crisis has shown that in opposite to many of the global Systemically Important Banks the co-operative banks with their regionwide branch network of often small structured primary banks overcame this challenge very well. This fact should be noticed by establishing the new regulatory framework Basel III.

Mit den Beschlüssen zur europäischen Regulierung im Dezember 2012 hat die EU einen Schritt in Richtung Bankenunion gemacht. Nach Ansicht von Sabine Lautenschläger, Deutsche Bundesbank, braucht Europa Zeit, um eine europäische Bankenaufsicht und einen europäischen Abwicklungsmechanismus auf ein solides rechtliches Fundament und auf starke Institutionen zu stellen. Eine Bankenunion in diesem Sinne sei auch keine schnelle und bequeme Lösung der gegenwärtigen Krise und erst recht kein Ersatz für eine anhaltende Gesundung der Staatsfinanzen. Ein längerfristiger Zeithorizont dürfe nicht aus den Augen verloren werden. Für Thomas Gstädtner ist es entscheidend, im Bereich der Bankenrestrukturierung vor der Etablierung der gemeinsamen Aufsicht eine weitere Harmonisierung des Rechts herbeizuführen, um der EZB bzw. einer europäischen/nationalen Restrukturierungsbehörde den direkten Eingriff und die Abwicklung von nicht-tragfähigen Banken zu ermöglichen. Sascha Steffen, European School of Management and Technology (ESMT), Berlin, sieht den Beschluss der EU zur europäischen Regulierung als einen Schritt in Richtung Bankenunion, deren Auf- und Ausbau noch lange Zeit in Anspruch nehmen wird. Die Bankenunion sei daher auch kein Modell zur Krisenbekämpfung, sondern eher eine Weiterentwicklung und langfristige Stabilisierung.

Im Juni 1992 hat die Kommission einen Richtlinienvorschlag veröffentlicht, mit dem Mindestregelungen für die Sicherung von Einlagen bei Kreditinstituten geschaffen werden sollen. Der Beitrag analysiert kritisch den Inhalt des Richtlinienvorschlags und beleuchtet kurz, welche Änderungen des deutschen Rechts aus der Verabschiedung des Entwurfs folgen würden.

Die Ursachen der Finanzkrise werden in der wissenschaftlichen Debatte sehr unterschiedlich beschrieben. Der Autor vertritt die Auffassung, dass die Finanzkrise im Wesentlichen aus einem fundamentalen Mangel an „sicheren“ Aktiva resultiert. Schutzmechanismen fur institutionelle Investoren im Geldmarkt, die wie die traditionelle Einlagensicherung funktionieren, konnten einen wesentlichen Beitrag zur Aufl osung der Finanzkrise leisten.

We study a run on uninsured deposits in Danish banks triggered by a reform that limited deposit insurance coverage. Using a unique dataset with information about all individual accounts in Danish banks, we show that the reform caused a 50% decrease in deposits above the insurance limit in non-systemic banks, but a much smaller decrease in systemic banks which experienced less withdrawals from uninsured accounts, but also more openings of new uninsured accounts. Our results highlight the significant risks from a differential reallocation of uninsured deposits across banks and, in turn, the need for high insurance limits during a crisis.

We study the consequences and optimal design of bank deposit insurance in a general equilibrium model. The model involves two production sectors. One sector is financed by issuing bonds to risk–averse households. Firms in the other sector are monitored and financed by banks. Households fundbanks through deposits and equity. Deposits are explicitly insured by a deposit insurance fund. Any remaining shortfall is implicitly guaranteed by the government. The deposit insurance fund charges banks a premium per unit of deposits whereas the government finances any necessary bail-outs by lump-sum taxation of households. When the deposit insurance premium is actuarially fair or higher than actuarially fair, two types of equilibria emerge: One type of equilibria supports the socially optimal (Arrow–Debreu) allo-cation, and the other type does not. In the latter case, bank lending is too large relative to equity and the probability that the banking system collapses is positive. Next, we show that a judicious combination of deposit insuranceand reinsurance eliminates all non–optimal equilibrium allocations., Economics Working Paper Series, 16/258

eingereicht von: Bettina Marina Schwaiger Linz, Univ., Dipl.-Arb., 2015

Eine Bankenunion für den Euroraum soll das Bankensystem sicherer machen. Dabei gilt es die drohende Gefahr des Konkurses einer Bank früh zu erkennen und rasch Maßnahmen zu treffen, um diese Gefahr abzuwenden. Im äußersten Fall der Abwicklung einer Bank ist vorgesehen, versicherte Einlagen (jene von Haushalten und Kleinunternehmen) über eine einheitliche Einlagensicherung zu schützen. Allerdings sollte die Einlagensicherung eine Quersubventionierung maroder Banken ausschließen. Der Einheitliche Abwicklungsmechanismus der Bankenunion hat sicherzustellen, dass konkursgefährdete Finanzinstitute bereits kapitalisiert oder abgewickelt worden sind, bevor die einheitliche Einlagensicherung in Kraft tritt. (Autorenreferat)

The paper analyses the relationship between deposit insurance, debt-holder monitoring, bank charter values, and risk taking for European banks. Utilising cross-sectional and time series variation in the existence of deposit insurance schemes in the EU, we find that the establishment of explicit deposit insurance significantly reduces the risk taking of banks. This finding stands in contrast to most of the previous empirical literature. It supports the hypothesis that in the absence of deposit insurance, European banking systems have been characterised by strong implicit insurance operating through the expectation of public intervention at times of distress. Hence the introduction of an explicit system may imply a de facto reduction in the scope of the safety net. This finding provides a new perspective on the effects of deposit insurance on risk taking. Unless the absence of any safety net is credible, the introduction of deposit insurance serves to explicitly limit the safety net and, hence, moral hazard. We also test further hypotheses regarding the interaction between deposit insurance and monitoring, charter values and "too-big-to-fail." We find that banks with lower charter values and more subordinated debt reduce risk taking more after the introduction of explicit deposit insurance, in support of the notion that charter values and subordinated debt may mitigate moral hazard. Finally, large banks (as measured in relation to the banking system as a whole) do not change their risk taking in response to the introduction of deposit insurance, which suggests that the introduction of explicit deposit insurance does not mitigate "too-big-to-fail" problems.

This paper discusses the creation of a European Banking Union. First, we discuss questions of design. We highlight seven fundamental choices that decision makers will need to make: Which EU countries should participate in the banking union? To which categories of banks should it apply? Which institution should be tasked with supervision? Which one should deal with resolution? How centralised should the deposit insurance system be? What kind of fiscal backing would be required? What governance framework and political institutions would be needed?

This paper deals with the relation between excessive risk taking and capital structure in banks. Examining a quarterly dataset of U.S. banks between 1993 and 2010, we find that equity is valued higher when more risky portfolios are chosen when leverage is high, and that more risk taking has a negative impact on valuation of the debt of highly leveraged banks. We find no evidence that deposit insurance is encouraging risk taking behaviour. We do find that banks with a more troubled loan portfolio take on more risk. Banks whose share price has slumped tend to gamble for resurrection by increasing the riskiness of their asset portfolios. The results suggest that incentives embedded in the capital structure of banks contribute to systemic fragility, and so support the Basel III proposals towards less leverage and higher loss absorption capacity of capital.

On 23 June 2010, the Magyar Nemzeti Bank and SUERF jointly organised a conference on "The Future of Banking in CESEE after the Financial Crisis", incorporating the SUERF Annual Lecture, delivered by Manfred Schepers, Vice President, Finance at the European Bank for Reconstruction and Development, on "The role of domestic financial markets in an integrated Europe". This SUERF Study compiles selected papers presented at this conference. To capture a full picture of the information and views collected at the conference, the introduction also summarises findings from presentations given orally at the conference only.

This paper uses survey data for 29,000 households from 29 transition economies to explore how the use of banking services is related to household characteristics, bank ownership structure and the development of the financial infrastructure. At the household level we find that the holding of a bank account or bank card increases with income, wealth and education in most countries and also find evidence for an urban-rural gap, as well as for a role of religion and social integration. Our results show that foreign bank ownership is associated with more bank accounts among high-wealth, high-income, and educated households. State ownership, on the other hand, does not induce financial inclusion of rural and poorer households. We find that higher deposit insurance coverage, better payment systems and creditor protection encourage the holding of bank accounts in particular by highincome and high-wealth households. All in all, our findings shed doubt on the ability of policy levers to broaden the financial system to disadvantaged groups.

This paper tests financial contagion due to interbank linkages. For identification we exploit an idiosyncratic, sudden shock caused by a large-bank failure in conjunction with detailed data on interbank exposures. First, we find robust evidence that higher interbank exposure to the failed bank leads to large deposit withdrawals. Second, the magnitude of contagion is higher for banks with weaker fundamentals. Third, interbank linkages among surviving banks further propagate the shock. Finally, we find results suggesting that there are real economic effects. These results suggest that interbank linkages act as an important channel of contagion and hold important policy implications.

Government provision of a financial safety net for financial institutions has been a key element of the policy response to the current crisis, with governments extending existing guarantees and introducing new ones. These measures have been helpful in avoiding a further accelerated loss of confidence. But they are not costless. Like any guarantee, deposit insurance gives rise to moral hazard, especially if the coverage is unlimited. In the midst of a crisis, the immediate task is to restore confidence, and guarantees can be helpful in that respect. Nonetheless, to keep market discipline operational, it is important to specify when the extra insurance will end, and this timeline needs to be credible. To be able to establish such a timeline the root causes of the lack of confidence—that is the effects of troubled assets on financial firms’ health—need to be addressed effectively. On a more fundamental level, once a government has ventured down the road of guarantee expansion, there may be a general perception that a government guarantee will always be available during crisis situations. As a consequence, other elements of the financial safety net may need to be strengthened, including the prudential and supervisory framework. Published as Policy Paper

Government provision of a financial safety net for financial institutions has been a key element of the policy response to the current crisis, with governments extending existing guarantees and introducing new ones. These measures have been helpful in avoiding a further accelerated loss of confidence. But they are not costless. Like any guarantee, deposit insurance gives rise to moral hazard, especially if the coverage is unlimited. Clearly, in the midst of a crisis, one should not be overly concerned with moral hazard, as the immediate task is to restore confidence, and guarantees can be helpful in that respect. Nonetheless, to keep market discipline operational, it is important to specify when the extra insurance will end, and this timeline needs to be credible. To be able to establish such a timeline the root causes of the lack of confidence - that is the effects of troubled assets on financial firms' health - need to be addressed effectively. On a more fundamental level, once a government has ventured down the road of guarantee expansion, there may be a general perception that a government guarantee will always be available during crisis situations. As a consequence, other elements of the financial safety net may need to be strengthened, including the prudential and supervisory framework.

The paper shows that mispriced deposit insurance and capital regulation were of second order importance in determining the capital structure of large U.S. and European banks during 1991 to 2004. Instead, standard cross-sectional determinants of non-financial firms’ leverage carry over to banks, except for banks whose capital ratio is close to the regulatory minimum. Consistent with a reduced role of deposit insurance, we document a shift in banks’ liability structure away from deposits towards non-deposit liabilities. We find that unobserved time-invariant bank fixed effects are ultimately the most important determinant of banks’ capital structures and that banks’ leverage converges to bank specific, time invariant targets.

One of the important consequences to be drawn from the course of the financial crisis up to now is the insight that more attention must be paid in the future to the factors of liquidity, liquidity management and liquidity protection. That holds true for the protection of the stability of an individual bank as it does for that of a whole national or even international financial system. The liquidity problems of a bank can certainly have a variety of causes. However, as an examination of the history of bank insolvencies and financial crises shows, an accelerated withdrawal of bank deposits by unsecured customers nearly always leads in the end to the collapse of an institution and, as an ultimate consequence, to a national or even international banking crisis. This insight has also brought the deposit insurance institutions in many countries around the world to the attention of political, regulatory and banking management discussions. The rapid, politically necessary, factually often not well founded, guarantee promises made by many governments have shown those responsible that in Europe the need for a fundamental revision of the present deposit insurance schemes must be urgently addressed. In most industrialized countries of the OECD, as well as in a range of other states, working groups are studying the necessary revisions and adjustments of the relevant institutions to meet the new economic and political conditions. Even if solutions of this sort continue to be arranged differently from one country to another on the basis of differing regulatory, historical and structural circumstances, a consensus is emerging over the important basic questions of deposit insurance system design and architecture. As a result of the worldwide financial crisis most European countries massively increased their coverage limits for their national deposit insurance schemes in the fall of 2008. Where no deposit insurance existed, it was introduced. Existing systems were critically scrutinized. In most countries the maximum insurance coverage was raised and the eligible deposit base was extended. Some individual states have even promised an unlimited deposit protection (in some cases with a time restriction). Under the pressure of an increasing number of bank failures these promises were made without revising the existing deposit insurance schemes themselves. In the course of 2009, both the individual European states and the EU itself then set about scrutinizing their existing protection schemes and mechanisms and revising the existing national deposit insurance schemes. It is accepted throughout the world that well designed deposit insurance is an important element in a national safety net for maintaining and extending the stability of the financial system. The design and structure, but also the implementation, of a deposit insurance scheme (DIS) of this sort throws up numerous institutional, procedural and instrumental questions. Such operative and strategic issues must be answered against the background of the overall national circumstances and in line with the country specific realities of the respective financial intermediate system. However, there is a series of topics that can be assessed and solved independently of such individual circumstances. This is even more the case since the worldwide revision of the deposit insurance schemes offers the opportunity to create the conditions for a future harmonization of national deposit insurance schemes at least within Europe. An assimilation of this sort is, in turn, the basis for future EU-wide or perhaps even European depositor protection, which, like any broadly based guarantee, would certainly be more efficient than a multitude of national solutions. This publication intends to make a contribution to the ongoing discussion of the complex questions connected with the further development of European deposit insurance schemes. Both complementing and extending the broad range of theoretical literature available, it focuses on some key design questions of modern deposit insurance schemes, on the discussion of their basic structural elements and on the appropriate consequences for the stakeholders in deposit insurance. We focus on: - the derivation of the most important requirements of a modern European deposit insurance, and the - discussion of specific organizational aspects and fundamental institutional requirements as well as of solutions for selected system building blocks. The first chapter analyzes the institutional framework of deposit insurance schemes and its various aspects of cost/benefit considerations. The second chapter discusses the fundamentals of modern deposit insurance. The third chapter examines selected strategic and instrumental questions concerning the organization and implementation of deposit insurance schemes. The fourth chapter focuses on some questions related to the international harmonization and coordination of the design of deposit insurance schemes. In all sections we address some lessons learned from the recent financial turmoil. The fifth chapter finally addresses some conclusions and sketches some policy implications for designing and implementing a modern deposit insurance scheme.

In his paper "Challenges Associated with the Expansion of Deposit Insurance Coverage during Fall 2008'" Sebastian Schich of the OECD has written an excellent overview of the current situation of bank deposit insurance in the industrial economies of the world. He finds that, facing a crisis of confidence leading to visible bank runs, bank supervisors nearly everywhere resorted to raising deposit insurance limits, in some cases to "unlimited" status. Some of these changes have limitations of scope or duration, but some of the political changes of recent years (expansion of the European Union, for example) call into question whether any limits will be observed or whether recently granted expansions of deposit insurance will be recalled in due time. There are, however, important lessons to be learned from the American experience with deposit insurance, which has been present in the United States since 1933 but only in recent decades in numerous other developed economies. Alternatives to deposit insurance do exist and still could be tried anywhere, taking regional differences into account, as long as an adequate institutional structure is in place first. In any case, the alternatives would be cheaper and more efficient than the fairly explicit subsidy of the banking industry that present systems of deposit insurance entail.

The Basel capital framework plays an important role in risk management by linking a bank's minimum capital requirements to the riskiness of its assets. Nevertheless, the risk estimates underlying these calculations may be imperfect, and it appears that a cyclical bias in measures of risk-adjusted capital contributed to procyclical increases in global leverage prior to the recent financial crisis. As such, international policy discussions are considering an unweighted leverage ratio as a supplement to existing risk-weighted capital requirements. Canadian banks offer a useful case study in this respect, having been subject to a regulatory ceiling on an unweighted leverage ratio since the early 1980s. The authors review lessons from the Canadian experience with leverage constraints, and provide some empirical analysis on how such constraints affect banks' leverage management. In contrast to a number of countries without regulatory constraints, leverage at major Canadian banks was relatively stable leading up to the crisis, reducing pressure for deleveraging during the economic downturn. Empirical results suggest that major Canadian banks follow different strategies for managing their leverage. Some banks tend to raise their precautionary buffer quickly, through sharp reductions in asset growth and faster capital growth, when a shock pushes leverage too close to its authorized limit. For other banks, shocks have more persistent effects on leverage, possibly because these banks tend to have higher buffers on average. Overall, the authors' results suggest that a leverage ceiling would be a useful tool to complement risk-weighted measures and mitigate procyclical tendencies in the financial system., Le dispositif d'adéquation des fonds propres de Bâle joue un rôle important dans la gestion des risques, car il lie les exigences minimales de fonds propres d'une banque au degré de risque de ses actifs. Toutefois, les estimations des risques qui sous-tendent ces calculs peuvent être imparfaites, et il semble qu'un biais cyclique dans les mesures des fonds propres corrigées pour tenir compte des risques ait contribué à l'augmentation procyclique du levier financier dans le monde avant la récente crise financière. C'est pourquoi des discussions ont lieu à l'échelle internationale sur la possibilité d'adopter un ratio de levier financier non pondéré pour complémenter les exigences actuelles d'adéquation des fonds propres qui sont pondérées en fonction des risques. Les banques canadiennes offrent un exemple utile à cet égard puisque leur ratio de levier financier non pondéré est assujetti à un plafond réglementaire depuis le début des années 1980. Les auteurs passent en revue certaines leçons tirées de l'expérience du Canada en matière de limitation du levier financier et livrent une analyse empirique de l'incidence de telles contraintes sur la gestion du levier financier dans les banques. Contrairement à ce qui a été observé dans plusieurs pays qui n'imposent aucune limite réglementaire, le levier financier des grandes banques canadiennes a été relativement stable avant la crise, ce qui a atténué les pressions pour le réduire au cours de la récession. Les résultats empiriques donnent à penser que les grandes banques du pays gèrent leur levier financier selon des stratégies différentes. Certaines ont tendance à hausser leur marge de précaution rapidement en freinant considérablement la croissance de leurs actifs et en accélérant celle de leurs fonds propres lorsqu'un choc pousse leur levier financier trop près de la limite autorisée. Pour d'autres banques, les chocs ont des effets plus persistants sur leur levier financier, peut-être parce qu'elles tendent à maintenir des marges plus élevées en moyenne. Dans l'ensemble, les résultats obtenus par les auteurs semblent indiquer qu'un plafonnement du levier financier apporterait un complément utile aux mesures pondérées au regard des risques et atténuerait les tendances procycliques dans le système financier.

This paper develops a global game model that allows for a rigorous analysis of partial deposit insurance and provides the first comparative statics of the optimal level of deposit coverage. The optimal amount of coverage increases with lower bank liquidity requirements, with a higher precision of depositors' information, and with a lower relevance of large, uninsured creditors, and it should not be increased in anticipation of an economic downturn. Optimal insurance is higher if there is contagion and lower if banks can assume excessive risk, but interestingly, a high level of coverage may not be optimal even in the absence of moral hazard on the part of banks. The model supports the inauguration of coinsurance provisions and is applied to compare various policies addressing financial fragility. While an optimal lending of last resort policy can outperform deposit insurance, anticipated bailouts are inferior in terms of welfare. Capital requirements are not a substitute for insurance, but mitigate excessive risk taking.

There are, at least, seven aspects relating to financial regulation where the recent, and still current, financial turmoil has thrown up issues for discussion. These include: 1. The scale and scope of deposit insurance; 2. Bank insolvency regimes, also known as prompt corrective action'; 3. Money market operations by Central Banks; 4. Commercial bank liquidity risk management; 5. Procyclicality of capital adequacy requirements (and mark-to-market), Basel II; lack of counter-cyclical instruments; 6. Boundaries of regulation, conduits, SIVs and reputational risk; 7. Crisis management:- (a) domestic, within countries, e.g. UK Tripartite Committee; (b) cross-border; how to bear the burden of cross-border defaults? This paper describes how the current crisis has exposed regulatory failings, drawing largely on recent UK experience, and suggests what remedial action might be undertaken.

This paper presents a dynamic general equilibrium model with sticky prices, in which "inside" money, made out of commercial banks’ liabilities, plays an active, structural role role. It is shown that, in such a model, an inside money shock has a well-defined meaning. A calibrated version of the model is shown to generate small, but non-negligible effects of inside money shocks on output and inflation. I also simulate the effect of a banking crisis in the model. Moreover, I find that it is optimal for monetary policy to react to such shocks, although reacting to inflation alone does not result in a significant welfare loss.

In the literature, bank runs take the form of withdrawals of real demand deposits that deplete a fixed reserve of goods in the banking system. This framework describes the type of bank run that has occurred historically in the United States and more recently in developing countries. However, in a modern banking system, large withdrawals take the form of electronic payments of inside money, with no analog of a depletion of a scarce reserve from the banking system. In a new framework of nominal demand deposits repayable in inside money, pure liquidity-driven bank runs do not occur. If there were excessive early withdrawals, nominal deposits would hedge the bank, and flexible monetary prices in the goods market would limit real consumption. The maturity mismatch of short-term liabilities and long-term assets is not sufficient for multiple equilibria bank runs without other frictions, such as problems in the interbank market. A key role of the bank is to ensure optimal real liquidity, allowing markets to optimally distribute consumption goods through the price mechanism.

We survey the theories of why banks promise to pay par on demand and examine evidence about the conditions under which banks have promised to pay the par value of deposits and banknotes on demand when holding only fractional reserves. The theoretical literature can be broadly divided into four strands: liquidity provision, asymmetric information, legal restrictions, and a medium of exchange. We assume that it is not zero cost to make a promise to redeem a liability at par value on demand. If so, then the conditions in the theories that result in par redemption are possible explanations of why banks promise to pay par on demand. If the explanation based on customers’ demand for liquidity is correct, payment of deposits at par will be promised when banks hold assets that are illiquid in the short run. If the asymmetric-information explanation based on the difficulty of valuing assets is correct, the marketability of banks’ assets determines whether banks promise to pay par. If the legal restrictions explanation of par redemption is correct, banks will not promise to pay par if they are not required to do so. If the transaction explanation is correct, banks will promise to pay par value only if the deposits are used in transactions. After the survey of the theoretical literature, we examine the history of banking in several countries in different eras: fourth-century Athens, medieval Italy, Japan, and free banking and money market mutual funds in the United States. We find that all of the theories can explain some of the observed banking arrangements, and none explain all of them.

The Federal Deposit Insurance Corporation (FDIC) currently insures bank deposit balances up to $100,000. According to some observers, statutory protection creates moral hazard problems for insurers because it allows banks to engage in risky activities. As an example, moral hazard was a key contributor to huge losses suffered when thrift institutions failed during the 1980s. This brief by Panos Konstas outlines a plan to reduce the risk of government losses by replacing insured deposits with uninsured deposits and eliminating some of the costs of deposit insurance. His plan proposes a self-insured (SI) depositor system that places an intermediary between the lender (saver) and borrower (bank) in the credit-flow chain. The FDIC would guarantee saver loans and allow the intermediary to borrow at the risk-free interest rate if the intermediary's bank deposit is statutorily defined outside the realm of FDIC insurance. The risk is therefore transferred to depositors (intermediaries); thus creating incentives for depositors to earn a rate of return at least equal to the cost of borrowing plus a risk premium based on the risk profile of banks.

Market discipline for financial institutions can be imposed not only from the liability side, as has often been stressed in the literature on the use of subordinated debt, but also from the asset side. This will be particularly true if good lending opportunities are in short supply, so that banks have to compete for projects. In such a setting, borrowers may demand that banks commit to monitoring by requiring that they use some of their own capital in lending, thus creating an asset market-based incentive for banks to hold capital. Borrowers can also provide banks with incentives to monitor by allowing them to reap some of the benefits from the loans, which accrue only if the loans are in fact paid o.. Since borrowers do not fully internalize the cost of raising capital to the banks, the level of capital demanded by market participants may be above the one chosen by a regulator, even when capital is a relatively costly source of funds. This implies that capital requirements may not be binding, as recent evidence seems to indicate. JEL Classification: G21, G38

Der aktuell diskutierte Gesetzentwurf für eine Reform der Einlagensicherung in Weißrussland verfolgt das Hauptziel, mehr Sparmittel der Bevölkerung für das planwirtschaftliche Wirtschaftssystem verfügbar zu machen. Bei einer nicht passgenau auf die Landessituation abgestimmten Ausgestaltung droht dabei aber die Gefahr, dass durch Moral Hazard-Effekte das ohnehin labile Bankensystem, das unter einer hohen Konzentration, staatlichen Eingriffen und einer schwachen Wirtschaft leidet, weiter destabilisiert wird. Das privatwirtschaftlich geprägte Einlagensicherungssystem in Deutschland als Vergleichsmaßstab zeigt vielfältige Ansatzpunkte für die kritische Analyse. The deposit insurance reform presently under discussion in Belarus aims at attracting more private savers? funds into the governmental directed economy. But the establishment of a deposit insurance system that does not precisely fit the country?s specific situation is prone to moral hazard effects which could further destabilize the fragile banking system that suffers from high concentration, governmental interference and a weak economy. The comparison to the German deposit insurance system, which relies partly on private organization, shows useful ideas for improvements.

Agency theory is used to evaluate how the European Union (EU) may deal with the resolution of goal and agency conflicts in dealing with failing financial institutions. Experience in the United States suggests that the financial and regulatory structure being put in place, which relies upon country-sponsored deposit insurance funds and home country responsibility for supervision and lender-of-last-resort functions, is not likely to be robust to the failure of a large EU institution that threatens the solvency of the deposit insurance fund or that poses systemic risk. The author concludes that the EU needs a centralized and common approach to dealing with troubled institutions.

In this paper, we investigate the claim that German banks are special compared to banks in other industrialised economies. We show that banks are of particular importance to the German economy?as financial intermediary, as lender to the corporate sector, and as part of the corporate governance system. Further, German banks are supervised by two supervisory institutions and have the highest deposit insurance in the world. And last but not least, German banks are numerous, perform poorly, and are part of a historically grown three-pillar system. Hence, German banks can indeed be characterised as unique when compared to other industrialised economies.

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004: The explicit or implicit protection of banks through government bail-out policies is a universal phenomenon. We analyze the competitive effects of such policies in two models with different degrees of transparency in the banking sector. Our main result is that the bail-out policy unambiguously leads to higher risk-taking at those banks that do not enjoy a bail-out guarantee. The reason is that the prospect of a bail-out induces the rotected bank to expand, thereby intensifying competition in the deposit market and depressing other banks' margins. In contrast, the effects on the protected bank's risk taking and on welfare depend on the transparency of the banking sector.

This paper explores sources of deposit dollarization unrelated to standard moral hazard arguments. We develop a model in which banks choose the optimal currency composition of their liabilities. We argue that the equal treatment of peso and dollar claims in the event of bank default can induce banks to attract dollar deposits above the socially desirable level. The distortion arises because dollar deposits are the only source of default risk in the model, but dollar depositors share the burden of the default with peso depositors. The incentive to dollarize is reinforced by common banking system safety nets such as deposit and bank insurance. Our findings suggest that regulators in bi-currency economies would potentially benefit by departing from the currency-blind benchmark and differentiating among currencies in a way that prevents undesirable currency mismatches

The FDIC used cross-guarantees to close thirty-eight subsidiaries of First RepublicBank Corporation in 1988 and eighteen subsidiaries of First City Bancorporation in 1992 when lead banks from each of these Texas-based bank holding companies were declared insolvent. I use this exogenous failure of otherwise healthy subsidiary banks as a natural experiment for studying the impact of bank failure on local-area real economic activity. I find that the closings of the subsidiaries were associated with a significant decline in bank lending that led to a permanent reduction in real county income of about 3 percent.

In this brief, Biagio Bossone of the International Monetary Fund evaluates narrow banking from the perspective of modern theories of financial intermediation. These theories portray the status quo banking system as a solution to otherwise intractable problems of imperfect information, risk, and even moral hazard. The system's characteristic coupling of liquid liabilities with illiquid assets - seen by some as an undesirable mismatch - in fact contributes greatly to the efficiency of the economy. Bossone argues that these efficiency gains outweigh the disadvantages associated with the existing legal framework.

In this paper we show that deposit insurance can increase the probability of systemic banking crisis, even though it is optimally designed and its premium is risk related. This is driven by the possibility of contagious bank runs. We prove that contagion only occurs if the correlation between the portfolios of banks is high enough. Without deposit insurance contagious bank runs can impose such great losses on banks, that banks choose less correlated portfolios to avoid contagion altogether. Optimal deposit insurance eliminates this incentive and thus the correlation of portfolios and with it the probability of systemic banking crisis can increase.