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Bank failure management – the role of deposit insurance

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FSI Papers  |  No 17  |  23 August 2019 by  Patrizia Baudino, Ryan Defina, José María Fernández Real, Kumudini Hajra and Ruth Walters PDF full text (417kb)  |  38 pages Managing bank failures is complex and costly. One way to expand the toolbox and fund its use is through the role of deposit insurance schemes (DIS). Where permitted by the applicable legal framework governing deposit insurance and crisis management, DIS may facilitate and support alternative measures to payout of insured deposits. Based on survey responses from around 50 International Association of

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FSI Papers  |  No 17  | 
23 August 2019
PDF full text
 (417kb)
 |  38 pages

Managing bank failures is complex and costly. One way to expand the toolbox and fund its use is through the role of deposit insurance schemes (DIS). Where permitted by the applicable legal framework governing deposit insurance and crisis management, DIS may facilitate and support alternative measures to payout of insured deposits. Based on survey responses from around 50 International Association of Deposit Insurers (IADI) members, the paper reviews practices for the use of DIS resources for alternative measures. More than 30 of those DIS can help fund alternative measures, such as purchase and assumption transactions, bridge banks, or capital and liquidity support. The paper discusses how DIS support for these measures can complement bank insolvency and resolution frameworks and expand the toolbox for bank failure management.

JEL classification:  G21, G28, G33

International Settlement
The Bank for International Settlements (BIS) is an international company limited by shares owned by central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.

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