Building a Stable European Deposit Insurance Scheme. Issue 2 (9th August 2018)

• Record Type: Journal Article
• Authors: Schoenmaker, Dirk
• Is Part Of: Journal of financial regulation. Volume 4:Issue 2(2018)
• Page Start: 314
• Page End: 320
• Publication Date: 2018-08-09
• Subjects: Financial institutions -- Law and legislation -- Periodicals; Financial services industry -- Law and legislation -- Periodicals; 346.0805
• DOI: 10.1093/jfr/fjy004
• Languages: English
• ISSNs: 2053-4833

Abstract

ABSTRACT: Deposit insurance, like any insurance scheme, raises moral hazard concerns. Such concerns arising from European deposit insurance can be alleviated through a country-specific component in the risk-based premium for deposit insurance and limits on sovereign bond exposures on bank balance sheets. This article, which forms part of the Euro Area Reform debate, argues, however, that proposals to maintain national compartments in a new European Deposit Insurance Scheme are self-defeating, as such compartments can be destabilizing in times of crisis.