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The impact of deposit guarantee schemes on bank stability - the experience of periods of systemic instability
,
Ewa Miklaszewska
https://doi.org/10.26354/bb.1.1.98.2025
Abstract
Deposit guaranteeing is a key component of the financial safety net that stabilises the banking system. The March 2023 episode of systemic instability in the US triggered a crisis of confidence as to whether the existing deposit guarantee framework adequately protects banks' resilience to panics and shocks. The article analyses and tests some of the assumptions of the ongoing debate on reforming the EU Crisis Management and Deposit Insurance (CMDI) package. The main conclusions of the literature review and the empirical study are that fundamental features such as adequate capitalisation and profitability of banks are crucial to maintain stability, while some of the proposals of the new CMDI are legitimate and will enhance the stability of the EU banking system. The empirical study confirms the main conclusions of the debate that bank runs and panics depend not only on the extent and level of deposit guarantee under national guarantee schemes, and that the volume of unguaranteed wholesale deposits in EU countries does not pose a serious threat to banking sector stability as an isolated factor.
Keywords:
DGS , CMDI directive , financial stability , systemic crisis 2023 , unguaranteed depositsJEL Codes
G21, G28, G32, K23Download files
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Vol. 98 No. 1 (2025)
Published: 2025-05-09
10.26354
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.