The 2007–2009 financial crisis saw a vast expansion in deposit insurance guarantees around the world and yet our understanding of the design and consequences of deposit insurance schemes is in its ...infancy. We provide a new rationale for the provision of deposit insurance. In our model the banking sector exhibits both adverse selection and moral hazard, which implies that the social benefits of bank monitoring must for incentive reasons be shared between depositors and banks. Consequently, socially too few deposits are made in equilibrium. Deposit insurance – or, equivalently, bank recapitalization – corrects this market failure. We find that deposit insurance should be funded not by banks or depositors but out of general taxation. The optimal level of deposit insurance varies inversely with the quality of the banking system. Hence, when the soundness of the financial sector is uncertain, governments should consider supporting deposit insurance schemes and undertaking subsidized recapitalizations.
Purpose
– The purpose of this paper is to examine the current regulatory framework of Greek Deposit and Investment Guarantee Fund, trying to show solutions for strengthening it.
...Design/methodology/approach
– This paper aims to investigate the deposit and investment guarantee fund in Greece by identifying new problems and developing solutions.
Findings
– The main finding is that the deposit and investment guarantee fund contributes to the stability of the Greek banking sector and also offers practical solutions to strengthen it. Greek Deposit and Investment Guarantee Fund has an important feature, which is the speed of a decision about a bank failure resolution (in five working days), but needs immediately strengthening and increasing its funds to cope with the resolution of non-viable banks and undertaking for costs. There should be an appropriate ratio between the size of total assets (especially cash and cash equivalents) of Greek Deposit and Investment Guarantee Fund and the amount of total guaranteed deposits, which is now below 2 per cent. Regulatory framework needs revising and fees must be increased if its funds fall below a certain level of coverage of guaranteed deposits. Also, a guarantee premium, not only a flat rate premium, should be implemented for all banks. An additional risk-adjusted premium varying according to Greek banks’ risks of their portfolios would be better to increase funds of deposit guarantee fund and reduce moral hazard of bank manager by increasing costs. They must ensure an adequate diversification of re-deposits of Greek Deposit and Investment Guarantee Fund funds and must limit and avoid a conflict of interest of its board membership for individuals who are actively involved in Greek commercial banks by implementing framework and rules about it. Also, as a consequence of obeying the regulatory framework, it is necessary to include as board members of Greek Deposit and Investment Guarantee Fund only those banks that are subject to strong prudential supervision and regulation.
Practical implications
– As a result of research, changes are necessary to immediately be made to cope with current financial crises and problems of Greek banking sector.
Originality/value
– The originality of this paper is that it is the first description of the Greek Deposit and Investment Guarantee Fund and its results are important for economists, politicians and international community, who evaluate the regulatory framework of Greek Deposit and Investment Guarantee Fund, especially at the current time when the Greek economy and the Greek banking sector are in a very weak fiscal position.
This report is a synthesis of three
evaluations carried out by the Independent Evaluation Group
and completed between July 2005 and February 2006, on
different aspects of Bank assistance to financial ...sector
development in client countries. The three evaluation
reports are World Bank Lending for Lines of Credit: An
Independent Evaluation Group (IEG) Evaluation; IEG Review of
World Bank Assistance for Financial Sector Reform; and
Financial Sector Assessment Program: IEG Review of the Joint
World Bank and IMF Initiative. This paper seeks to draw out
common themes and issues that have arisen from the three
evaluations, which reviewed major components of the
Bank's assistance during more than a decade to the
financial sectors of client countries.
To address these broad questions: How to
analyze the impact of globalization? What is the effect of
rich countries' policies on developing ones? How to
redefine the development agenda and scale-up ...the aid effort?
The European Conference on Development Economics
(ABCDE-Europe) focused on some of the problematic features
of globalization and discussed the global impact of
developed countries' policies in a number of crucial
areas for developing countries, such as farm trade,
migrations, the protection of intellectual property, and
capital flows. It also highlighted the role and
responsibilities of the private sector. This volume,
organized in twelve chapters, opens with the five plenary
session papers that were at the core of the discussion and
focuses on five crucial issues and policy challenges:
agricultural trade, migration flows, intellectual property
rights, the costs and benefits of international capital
flows, and options for sovereign debt restructuring. The
seven remaining chapters offer a collection of selected
papers discussed in the parallel workshops held during the
conference. They cover a wider range of issues, from the
role and responsibilities of private actors and the
components of the business environment, to the sources of
development finance and the relationship between commodity
resources and development, to the issue of scaling up, and
the possibility of intensifying the volume and impact of
development aid.
Turmoil at Twenty Mitra, Pradeep; Selowsky, Marcelo; Zalduendo, Juan
2010, 2009, 10-30-2009, 20100101
eBook, Book
Odprti dostop
Two decades since the fall of the Berlin wall, Central and Eastern Europe and the former Soviet Union, is experiencing the deepest contraction and is expected to see the weakest recovery in output ...among all emerging and developing economy regions a result of the global financial and economic crisis. Their commitment to open trade and financial integration as part of the transition from plan to market has brought many gains, but a combination of large global imbalances during this period and policy weaknesses in a number of countries made them vulnerable to the crisis. The global recession is expected to be deeper and more protracted than any in recent memory and will test the international community's commitment to both the middle income countries of emerging Europe with access to capital markets as well as the poorest countries of the former Soviet Union. Recovery from the crisis will require domestic policy reform in the countries and coordinated and sustained international collective action.After two decades, the business environment in transition countries increasingly resembles that of market economies at similar levels of per capita income. Strong private sector growth preceding 2008-2009 led to firms reporting infrastructure and skilled labor as being among the most important barriers to doing business for the first time since transition began. But rapid growth has also increased the costs to firms of weak market economy institutions, in part the product of legacy, especially in respect of the legal environment and corruption. Preparing for the recovery from crisis will require attention to these weaknesses in the enabling environment.
This evaluation presents an independent assessment of the Bank's support for financial sector reforms over the period FY93-03. It assesses the extent to which the objectives of Bank assistance were ...achieved, including reducing government ownership of financial intermediaries, decreased market concentration, increased competition and efficiency, healthier and more stable financial intermediaries, and deeper, more developed financial systems. It also examines Bank support for financial sector reforms in countries under crisis.
East Asian Finance Ghosh, Swati R
2006, 09-07-2006, 20060101
eBook, Book
Odprti dostop
This study analyzes the key issues and constraints - in terms of efficiency, access and safety and soundness - faced by East Asian countries in developing their financial markets which are at ...different stages of development, drawing on global experience. The study takes stock of the initiatives being undertaken at the regional level to foster greater financial integration as a means of deepening and diversifying financial markets, and on the policy issues that need to be addressed at the domestic level to deepen and diversify financial markets and to actually benefit from the actions that are being taken at the regional level.
The Annual World Bank Conference on Development Economics (ABCDE) brings together the worlds leading scholars and development practitioners for a lively debate on state-of-the-art thinking in ...development policy and the implications for the global economy. The 17th conference was held in Dakar, Senegal, on January 27, 2005. The theme of the conference was growth and integration, which was divided into five topics: growth and integration, financial reforms, economic development, trade and development, and investment climate.
