Skip to main content

Research Repository

Advanced Search

Bank Capital Adequacy versus Deposit Insurance

Dowd, K.

Bank Capital Adequacy versus Deposit Insurance Thumbnail


Authors



Abstract

This paper re-evaluates the Diamond-Dybvig analysis of deposit insurance by constructing a model in which an agent not in need of liquidity sets up a financial intermediary to sell liquidity insurance to other agents who desire such insurance. This intermediary resembles a real-world bank in that it is financed by both demand deposits and equity. It also dominates the Diamond-Dybvig intermediary, which is funded only by demand deposits. Provided the intermediary has adequate capital, it also is perfectly safe. Deposit insurance then is both unnecessary and incapable of achieving a superior outcome to that which private agents could achieve on their own.

Citation

Dowd, K. (2000). Bank Capital Adequacy versus Deposit Insurance. Journal of Financial Services Research, 17(1), 7-15. https://doi.org/10.1023/a%3A1008149106536

Journal Article Type Article
Publication Date Feb 1, 2000
Deposit Date Mar 7, 2013
Publicly Available Date Mar 28, 2024
Journal Journal of Financial Services Research
Print ISSN 0920-8550
Electronic ISSN 1573-0735
Publisher Springer
Peer Reviewed Peer Reviewed
Volume 17
Issue 1
Pages 7-15
DOI https://doi.org/10.1023/a%3A1008149106536
Public URL https://durham-repository.worktribe.com/output/1465555

Files

Published Journal Article (73 Kb)
PDF

Copyright Statement
Reprinted from Journal of Financial Services Research, 17(1), 2000, 7-15, with permission of Kluwer Law International.




You might also like



Downloadable Citations