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Bank Insolvency, Deposit Insurance and capital Adequacy

Marini, François (2003), Bank Insolvency, Deposit Insurance and capital Adequacy, Journal of Financial Services Research, 24, p. 67–78. 10.1023/A:1025916701866

Type
Article accepté pour publication ou publié
Date
2003
Journal name
Journal of Financial Services Research
Number
24
Publisher
Springer
Pages
67–78
Publication identifier
Metadata
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Author(s)
Marini, François
Laboratoire d'Economie de Dauphine [LEDa]
Abstract (EN)
This paper extends the Dowd (2000) model by introducing a risky investment technology. This assumption allows to introduce the possibility of an insolvency crisis. A banker may earn a positive expected profit by insuring depositors against the technological risk. If the bank has adequate capital, the insurance is credible and an insolvency crisis cannot occur. A public safety net may be unnecessary to prevent insolvency crises.
Subjects / Keywords
Bank; Capital; Insurance company
JEL
G22 - Insurance; Insurance Companies; Actuarial Studies
E22 - Investment; Capital; Intangible Capital; Capacity
E32 - Business Fluctuations; Cycles