The promptness of European Deposit Protection Schemes to face banking failures

Cariboni, Jessica; Joossens, Elisabeth; Uboldi, Adamo
June 2010
Journal of Banking Regulation;Jun2010, Vol. 11 Issue 3, p191
Academic Journal
This article aims to investigate the efficiency of European Deposit Protection Schemes (DPSs) in providing adequate financial protection to depositors and enhancing the stability of the financial sector. Using data provided by European DPSs, the analysis focuses on different aspects of their operation. The intervention procedures in force across European Union (EU) countries are compared, the amount of available funds are analysed by means of different quantitative measures to assess the fund adequacy and the promptness of consumer repayments is investigated using data on historical payouts. It can be concluded that fairly heterogeneous procedures are currently in place in the EU Member States, thus posing the question of whether more harmonised rules are needed to enhance the effectiveness of the DPSs� role in the financial safety net. The analysis shows that, while under stable market situations, most of the European DPSs would be capable of facing the failure of a non-systemic bank, in a critical period, such as the one that prevailed at the end of 2008, they could encounter problems in adequately fulfilling their consumer protection role. With regard to the time period needed to repay depositors, results highlight that more stringent rules might be advisable from a consumer's perspective.


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