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Über dieses Buch

This book examines the changing role of Deposit Guarantee Schemes (DGSs) as a financial safety net of the European Union, with specific emphasis on post-crisis reforms. The author identifies the institutional weaknesses of DGSs and analyses their functioning in post-crisis conditions. Readers discover the extent to which the participation of DGSs in bank resolution increases effectiveness, and whether such enhancement of the financial safety net allows for the liquidation of large financial institutions. Finally, the book identifies, categorises, and analyses possible forms of involvement of DGSs in the EU resolution, as well as the proposal of methods for the quantitative measurement of the preparedness of DGSs to participate in this process.

Inhaltsverzeichnis

Frontmatter

1. Introduction

The dynamic development of the financial market determines the necessity of creating public institutions responsible for the proper functioning, stability, and safety of market participants. Traditionally, central banks, the government, supervisory bodies, and deposit insurance agencies are all singled out in an institutional perspective as participants of the so-called financial safety net. The evolution of the structure is a frequent subject of thematic research. Times of severe turmoil, such as the global financial crisis that triggered the discussion on necessary reforms, bring constant inspiration for further studies. The experiences derived from the recent financial crisis made it necessary to redefine the role of the financial safety net, along with its deposit guarantee schemes.
Jakub Kerlin

2. Participation of Deposit Guarantee Schemes in Resolution—Literature Review

This chapter provides an overview of literature regarding the topic of deposit guarantee and resolution of financial institutions. In the first part, the reader will find an explanation of the most important terminology, used extensively throughout the book. Further on, a comprehensive overview of literature concerning both topics has been prepared—namely, the cases where both institutions work cooperatively. The analysis described in this chapter allowed for the indication of selected areas and research deficits, thus providing an outline for future studies, direction, and roles deposit guarantee institutions should take.
Jakub Kerlin

3. Development of Deposit Guarantee Schemes and Their Role in the Financial Safety Net

This chapter presents the development of deposit guarantee schemes, starting from an overview of the scope of research on deposit insurance agencies in chosen countries. Properties that distinguish specific types of deposit guarantee schemes from one another have been demonstrated, along with a presentation of how deposit insurance agencies are established in the EU and globally. A new classification of deposit guarantee schemes that includes their historical and postcrisis forms is hereby offered. The chapter is concluded by the analysis of the proposal of establishing a pan-European Deposit Insurance Scheme—EDIS.
Jakub Kerlin

4. Financial Capabilities of Deposit Guarantee Schemes

This chapter presents the effectiveness of potential deposit guarantee scheme interventions in their most common forms, namely, standard paybox deposit payout procedures for insolvent banks. Initially, two key deposit insurance agency effectiveness components, psychological and financial, were described. Special attention was given to the scope of potentially effective interventions of deposit insurers, which largely rely on financial means of the given institution. The chapter presents the causes of low deposit guarantee schemes’ effectiveness. Analysis of the traditional paybox deposit guarantee model proves it inefficient. Also, it is shown that proposed reforms may be insufficient to provide depositor protection and financial stability in the EU.
Jakub Kerlin

5. The Concept of Resolution of Financial Institutions

This chapter presents the theoretical basis of introducing resolution—a procedure designed as the answer to deposit guarantee scheme weaknesses—in the EU. Key goals and conditions related to the procedure, as well as administrative instruments designed for the elimination of large financial institutions, were hereby described. Special attention was paid to financing resolution, because means of the financial sector (not public resources) are determinants for the effectiveness of the procedure. The role of deposit insurance agencies in the procedures was also described, with special emphasis on the high level of freedom in institutional shaping of EU financial safety in the aftermath of the crisis. Instruments applied in resolution were also scrutinized, and their weaknesses and little practical experience were brought to light.
Jakub Kerlin

6. The Impact of Deposit Guarantee Schemes on the Effectiveness of Resolution

This chapter presents research on the potential effectiveness of resolution. Several scenarios have been tested, both favorable and unfavorable, in multiple variations of financial institution resolution. The goal of the study was to determine the extent to which the new EU procedure impacts specific member states, as well as verify whether participation of the deposit insurance agency in the process increases the potential success of intervention toward banks.
Jakub Kerlin

7. Readiness of Deposit Guarantee Schemes to Participate in Resolution

This chapter analyzes the extent to which EU guarantee schemes are prepared to participate in resolution. An innovate method of measuring whether deposit insurance agencies’ readiness for taking on new roles within the EU financial safety net is also hereby applied. The evaluation is based on the creation of a resolution readiness index for deposit insurance agencies, which enables the differentiation of countries based on their results. The index was built through the selection of characteristics of deposit insurers, such as their political position and legislative authority, which largely reflect their preparedness for resolution procedures. This chapter is concluded with practical recommendations for particular groups of EU member states.
Jakub Kerlin

8. Conclusion

The following publication presented the analysis of the changing deposit insurance agency role in the safety net of EU member states in light of postcrisis reform. Research areas, which have become consolidated throughout the years, have undergone fundamental changes due to global financial crisis experiences. The inadequate financial safety net structure in many countries, including the EU, forced the change of institutional construction of participants of the financial safety net. Since the year 2007, deposit insurance agencies have been dynamically transforming toward more complex action forms. Taking into consideration the history of deposit guarantee, it must be underlined that evolution of deposit insurance agencies is constantly accelerating.
Jakub Kerlin

Backmatter

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