Abstract
This paper which extends the settings of Chen and Hasan (2008) uses the game theoretic model to focus on the topics of not only interactive policies between a bank and a depositor but bank runs. Our study discovers that depending on different economic terms, the bank will probably propose two different deposit contracts for depositor to accept or not. After the acceptance of the deposit contract, the depositor will choose his withdrawal time on the basis of different liquidity preferences. On the other hand, bank runs occur only when one of the deposit contracts is proposed and the negative information of the investment project is disclosed to depositors.
Highlights
IntroductionSince the outbreak of the 1997 Asian financial crisis, Hong Kong's Bank of East Asia (abbreviated to BEA) firstly suffered a bank run on September 22, 2008
Since the outbreak of the 1997 Asian financial crisis, Hong Kong's Bank of East Asia firstly suffered a bank run on September 22, 2008
Deputy Chief Executive of BEA issued a statement to clarify that the financial position of BEA was healthy and indicated that the rumor mongers were an attempt to undermine the stability of the financial system
Summary
Since the outbreak of the 1997 Asian financial crisis, Hong Kong's Bank of East Asia (abbreviated to BEA) firstly suffered a bank run on September 22, 2008. To solve the problem of bank run, the Chief Executive Officer of BEA clarified again and the monetary authority of Hong Kong and the Financial Secretary were publicly behind BEA and guaranteed the safety and soundness of the banking system. This event subsided on September 25, 2008. They point out that it can reduce the incidence of runs if the deposit insurance system is designed as that some depositors are fully insured and the others are partially insured.
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