Working Paper: CEPR ID: DP5277
Authors: Harry Huizinga
Abstract: The EU deposit insurance directive requires member states to maintain deposit insurance with a minimum insured amount of 20,000 euros. This paper reviews the rationale for international coordination of deposit insurance policies. For international externalities of deposit insurance policies to exist, there has to be international ownership of either bank deposits or bank shares. On both counts, EU banking markets are currently highly integrated. The minimum coverage of 20,000 euros imposes costs if it forces some countries to 'overinsure' deposits. From a national perspective, the deposit insurance directive does not appear to result in overinsurance in the EU-15, but there may be overinsurance in several of the new member states.
Keywords: deposit insurance; international coordination
JEL Codes: F36; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EU Deposit Insurance Directive (G28) | overinsurance in new accession countries (G52) |
| minimum coverage of 20,000 euros (G52) | overinsurance in certain EU member states (G52) |
| EU Deposit Insurance Directive (G28) | likelihood of banking crisis (F65) |
| higher coverage levels (G52) | riskier behavior among banks (G21) |
| EU Deposit Insurance Directive (G28) | minimal influence on EU15 deposit insurance policies (F36) |
| EU Deposit Insurance Directive (G28) | costs on new member states (F55) |
| deposit insurance (G28) | likelihood of financial crises (G01) |