The Role of Deposit Guarantee Schemes as a Financial Safety Net in the European Union

361 Pages·2017·9.6 MB·English

by  Kerlin, Jakub

Palgrave Macmillan Studies in
Banking and Financial Institutions
Series Editor
Philip Molyneux
Bangor University
Bangor, United Kingdom
The Palgrave Macmillan Studies in Banking and Financial Institutions
series is international in orientation and includes studies of banking
systemsinparticularcountriesorregionsaswellascontemporarythemes
suchasIslamicBanking,FinancialExclusion,MergersandAcquisitions,
RiskManagement,andITinBanking.Thebooksfocusonresearchand
practice and include up to date and innovative studies that cover issues
which impact banking systems globally.
More information about this series at
http://www.springer.com/series/14678
Jakub Kerlin
The Role of Deposit
Guarantee Schemes
as a Financial Safety
Net in the
European Union
JakubKerlin
WarsawSchoolofEconomics
Warsaw,Poland
PalgraveMacmillanStudiesinBankingandFinancialInstitutions
ISBN978-3-319-54162-4 ISBN978-3-319-54163-1(eBook)
DOI10.1007/978-3-319-54163-1
LibraryofCongressControlNumber:2017943384
©TheEditor(s)(ifapplicable)andTheAuthor(s)2017
Thisworkissubjecttocopyright.AllrightsaresolelyandexclusivelylicensedbythePublisher,whether
thewholeorpartofthematerialisconcerned,specificallytherightsoftranslation,reprinting,reuseof
illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and
transmission or information storage and retrieval, electronic adaptation, computer software, or by
similarordissimilarmethodologynowknownorhereafterdeveloped.
Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublica-
tiondoesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromthe
relevantprotectivelawsandregulationsandthereforefreeforgeneraluse.
Thepublisher,theauthorsandtheeditorsaresafetoassumethattheadviceandinformationinthis
book are believed to be true and accurate at the date of publication. Neither the publisher nor the
authorsortheeditorsgiveawarranty,expressorimplied,withrespecttothematerialcontainedherein
orforanyerrorsoromissionsthatmayhavebeenmade.Thepublisherremainsneutralwithregardto
jurisdictionalclaimsinpublishedmapsandinstitutionalaffiliations.
Coverillustration:OpasChotiphantawanon/AlamyStockPhoto
Printedonacid-freepaper
ThisPalgraveMacmillanimprintispublishedbySpringerNature
TheregisteredcompanyisSpringerInternationalPublishingAG
Theregisteredcompanyaddressis:Gewerbestrasse11,6330Cham,Switzerland
For Wiktoria, who always believes
Contents
1 Introduction 1
2 Participation of Deposit Guarantee Schemes
––
in Resolution Literature Review 7
2.1 Introduction 7
fi
2.2 Selected De nition Remarks and Challenges 8
2.2.1 Deposit Guarantee Schemes 8
2.2.2 Resolution of Financial Institutions 13
2.3 Mainstream Approach in the Precrisis Period 15
2.4 Change of Approach After the Outbreak of the Crisis 20
2.5 New Fields and Research Gaps 24
2.6 Conclusion 26
References 26
3 Development of Deposit Guarantee Schemes and Their
Role in the Financial Safety Net 29
3.1 Introduction 29
3.2 Research on the Evolution of the Role of Deposit
Guarantee Schemes 30
3.3 Creation of Deposit Guarantee Schemes 31
3.3.1 Creation of Deposit Guarantee Schemes
in the World 31
vii
viii Contents
3.3.2 Creation of Deposit Guarantee Schemes
in the European Union 37
3.3.3 Creation of Deposit Guarantee Schemes
Amidst Crises 39
3.4 Development of Deposit Guarantee Schemes 43
3.5 Key Construction Elements of Deposit Guarantee
Schemes 48
3.5.1 Mandate 48
3.5.2 Operational Capability 53
3.5.3 Position in Financial Safety Net 56
3.6 The Evolution of Regulatory and Legal Framework
on Deposit Guarantee Schemes in the European
Union 57
3.6.1 Commission Recommendation 87/63/ECC 58
3.6.2 Directive 94/19/EC 59
3.6.3 Directive Overview and Amendment
2009/14/EC 61
3.6.4 Proposal of New Directive from 12 July 2010 63
3.6.5 Directive2014/49/EUandChosenProvisions
of Directive 2014/59/EU 68
3.7 Proposal for EDIS 75
3.7.1 Key Assumptions 76
fi
3.7.2 Potential Bene ts 78
3.7.3 Potential Flaws and Their Minimizing 81
3.8 Conclusion 84
References 85
4 Financial Capabilities of Deposit Guarantee Schemes 91
4.1 Introduction 91
4.2 Capabilities of Deposit Guarantee Schemes 92
4.2.1 Psychological Component 93
4.2.2 Financial Component 98
4.3 Scope of Successful Intervention of a Deposit
Guarantee Scheme 102
Contents ix
4.3.1 Measurement Method 102
4.3.2 Data Sources 105
4.3.3 Analysis and Evaluation of Successful
Intervention Scope 110
ffi
4.4 Causes of Deposit Guarantee Scheme Ine ciency 118
4.4.1 Banking Sector Size 119
4.4.2 Deposit Value 122
4.4.3 Foreign Capital Share 123
4.4.4 Banking Sector Concentration 124
4.4.5 Guarantee Level 127
ff
4.4.6 E ectiveness of Insolvency Proceedings 131
4.5 Conclusion 133
References 134
5 The Concept of Resolution of Financial Institutions 137
5.1 Introduction 137
5.2 Reasons to Introduce New Solutions 138
5.3 Law Sources on Resolution 139
5.4 Characteristics of New Procedures 146
5.4.1 Limitations of State Aid 146
5.4.2 Objectives 149
5.4.3 Principles 151
5.4.4 Phases and Mode of Action 156
5.5 Resolution Planning 158
5.5.1 Recovery Plans 159
5.5.2 Resolution Plans 160
5.6 Resolution Tools 164
5.6.1 Sale of Business Tool 165
5.6.2 Establishment of the Bridge Institution 168
5.6.3 Asset Separation Tool 170
5.6.4 Bail-In 171
5.7 Resolution Funding 175
5.7.1 Resolution Financing Mechanism 176
5.7.2 Target Levels and Contributions 179
x Contents
5.7.3 Use of Financial Resources 181
5.8 Institutional Architecture of the Financial
Safety Net 183
5.9 Criticism of the Resolution Concept 189
5.10 Conclusion 196
References 197
6 The Impact of Deposit Guarantee Schemes
ff
on the E ectiveness of Resolution 203
6.1 Introduction 203
6.2 Background and Purpose of the Study 204
6.3 Method Description 206
6.4 Data Sources 217
6.5 Analysis of Carrying Out Resolution of a Single
Institution 220
ff
6.5.1 E ectiveness of Resolution in the RF Variant 220
ff
6.5.2 E ectiveness of Resolution in the RF+DGS
Variant 224
6.5.3 Supplementary Study Results 230
6.6 Analysis of Implementing Simultaneous Resolution
of Two Institutions 234
6.6.1 RF Variant Only 235
6.6.2 RF+DGS Variant 238
6.7 Calibration of National Target Levels 243
6.8 Conclusion 246
References 247
7 Readiness of Deposit Guarantee Schemes to Participate
in Resolution 251
7.1 Introduction 251
7.2 Background and Purpose of the Study 252
7.3 Method Description 254
7.4 Data Sources 266
7.5 Analysis of Results and Concluding Remarks 268