Abstract
The guidelines published by the European Banking Authority in 2015 about the contributions to the Deposit Guarantee Systems, establish two approaches to classify the member entities’ risk: the bucket method and the sliding scale method, allowing freedom to every Member State to decide which methodology to use. In this work, using the bucket method with two different clustering techniques, k-means and soft computing, in a sample that represents more than 90% of the deposits covered in the Spanish banking system during the 2008 to 2014 period, the differences in the distribution of the Deposit Guarantee Fund risk and in the entities’ contributions is analyzed. The obtained results reveal important differences. Consequently, the technique chosen by each country will determine the contributions regime.
Highlights
Among the key aspects to secure the financial strength and prevent systemic crisis scenarios are, among others, ensure the safety of the depositors in the credit companies and ensure an orderly management of the bank insolvencies, objectives entrusted to the Deposit Guarantee System (DGS).Due to the financial crisis, a profound change was boosted in the international regulatory standards aimed at building a more robust banking system, and thereby consolidate financial stability
If we look at the distribution of covered deposits at the risk levels established by both techniques (Figure 3), and taking into account the level of risk associated with the DGS depending on the number of entities in each risk category and, the volume of covered deposits in each one, the distribution of the covered deposits present significant differences according to the classification procedure, mainly in the lanes
To reflect the above results in the total contributions to be undertaken by the entities to the Deposit Guarantee Fund of Credit Institutions (FGDEC), we calculate the risk-adjusted contributions according to the Eq (1) from the classifications obtained with both analyzes
Summary
Among the key aspects to secure the financial strength and prevent systemic crisis scenarios are, among others, ensure the safety of the depositors in the credit companies and ensure an orderly management of the bank insolvencies, objectives entrusted to the Deposit Guarantee System (DGS). The DDGS establishes, in its Article 13 (3), the commission to the European Banking Authority (EBA) to issue the guidelines specifying the methods for calculating the contributions to the Deposit Guarantee Systems (DGS) and, in particular, will have to include a calculation formula, the specific indicators, the kinds of risks for the members, the risk weights thresholds assigned to specific risk types and other necessary elements. These guidelines are based on the principles agreed upon at an international level, such as the BISIADI Basic Principles for Effective Deposit Insurance Systems[4] and the IADI General Guidance for the development of differential premiums[5].
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