<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This paper provides an insight into the behaviour of the liability side of bank balance sheet in response to explicit deposit insurance. It is an empirical investigation into the choice of a rational bank maximizing its bank value in terms of deposit and non-deposit liabilities after the implementation of explicit deposit insurance. The paper tests how banks' liabilities are affected because of the safety net and its design. Banks lower their leverage ratio as a response to the explicit deposit insurance. The paper finds evidence of depositor shifting funds between the types of deposits in the bank as a result of the explicit deposit insurance. It provides evidence of the importance of setting the right coverage in order to prevent the adverse effects that deposit insurance induces. It studies how the safety net design features affect the bank liability structure. The study finds that besides the explicit deposit insurance, the bank liability structure is affected by factors like tax expense, bank size, overheads, and dividend payout.</p></abstract>

This paper provides an insight into the behaviour of the liability side of bank balance sheet in response to explicit deposit insurance. It is an empirical investigation into the choice of a rational bank maximizing its bank value in terms of deposit and non-deposit liabilities after the implementation of explicit deposit insurance. The paper tests how banks' liabilities are affected because of the safety net and its design. Banks lower their leverage ratio as a response to the explicit deposit insurance. The paper finds evidence of depositor shifting funds between the types of deposits in the bank as a result of the explicit deposit insurance. It provides evidence of the importance of setting the right coverage in order to prevent the adverse effects that deposit insurance induces. It studies how the safety net design features affect the bank liability structure. The study finds that besides the explicit deposit insurance, the bank liability structure is affected by factors like tax expense, bank size, overheads, and dividend payout.

An Empirical Investigation into the Effect of Explicit Deposit Insurance and Design on the Liability Structure of Banks

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

This paper provides an insight into the behaviour of the liability side of bank balance sheet in response to explicit deposit insurance. It is an empirical...

An Empirical Investigation into the Effect of Explicit Deposit Insurance and Design on the Liability Structure of Banks

Publié en ligne: 19 sept. 2019

Pages: 179 - 206

Reçu: 23 avr. 2018

Accepté: 06 juil. 2018

DOI: https://doi.org/10.2478/jcbtp-2019-0030

Mots clés
Bank Liability Structure, Explicit Deposit Insurance, Leverage

© 2019 Khalil Ullah Mohammad et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

An Empirical Investigation into the Effect of Explicit Deposit Insurance and Design on the Liability Structure of Banks

Publié en ligne: 19 sept. 2019

Pages: 179 - 206

Reçu: 23 avr. 2018

Accepté: 06 juil. 2018

DOI: https://doi.org/10.2478/jcbtp-2019-0030

Mots clésBank Liability Structure, Explicit Deposit Insurance, Leverage

© 2019 Khalil Ullah Mohammad et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Mots clés
Bank Liability Structure, Explicit Deposit Insurance, Leverage