Deposit insurance and international bank deposits

This paper examines how international depositors respond to national deposit insurance policies. Countries with explicit deposit insurance are found to be relatively attractive to international non-bank depositors. Deposit schemes characterised by co-insurance, a private administration, and a low deposit insurance premium appear to be particularly favoured by these depositors. The sensitivity of non-bank deposits to deposit insurance policies opens up the possibility of international regulatory competition in this area. The EU directive on deposit insurance imposes minimum standards on national deposit insurance policies. This directive, however, is silent on several important features of deposit insurance such as the level of the deposit insurance premium. Hence, it may not preclude regulatory competition in Europe.