Real Deposit Insurance Coverage: An International Study

Abstract

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">Recently several countries have implemented explicit deposit insurance systems. In most countries the adoption of an explicit deposit insurance system followed a banking crisis. This paper examines the impact of demographic, social, and political factors on the presence of an explicit deposit insurance system in a country. Moreover, for a subset of countries with explicit deposit insurance system we try to identify demographic, political, economic, and financial factors that affect the level of deposit insurance coverage. The findings suggest that life expectancy and political rights are related to whether an explicit deposit insurance system is in place or not. For countries with explicit deposit insurance systems the level of income, the importance of the banking sector within the financial system, and the development of domestic banking sector have a significant impact on the level of deposit insurance coverage level. The level of income, deposit money bank assets to GDP ratio, bank overhead costs to total assets ratio, presence of co-insurance, and type of administration are statistically significant in explaining differences in the level of coverage among countries. </span></span></p>