Title: Role of deposit insurance schemes on financial markets

Authors: Magdalena Kozińska

Addresses: Banking Institute, Warsaw School of Economics, Al. Niepodległości 162, 02-554 Warsaw, Poland

Abstract: In the paper, 109 deposit insurance schemes have been evaluated in terms of their investment policies designed for funds collected from banks. Almost half of them develop investment strategies involving the activity on the financial markets. Nevertheless, the strategies have to be compliant with the applicable local regulations. The aim of the paper is to evaluate the impact that deposit guarantors may have on the financial markets, mainly on the sovereign debt market. In this regard at least two mechanisms negatively influencing the stability of national sovereign debt market have been identified. The research confirmed that the activity of deposit guarantee funds may have destabilising effects but they have not been addressed so far in legal framework for deposit insurance schemes.

Keywords: deposit guarantee scheme; deposit insurance fund; investment policy; capital markets; sovereign debt markets; financial stability; banking crisis; bank contributions; public policy; moral hazard.

DOI: 10.1504/IJMEF.2021.113312

International Journal of Monetary Economics and Finance, 2021 Vol.14 No.1, pp.91 - 104

Received: 01 Nov 2019
Accepted: 08 Oct 2020
Published online: 26 Feb 2021 *

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