Writing Resources
There are number of literature that empirically analyzed the impact of deposit insurance system on banking risk taking activities Study that conducted by Demirguc Kunt A Detragiache E 1999 carried out on large sample of panel data on 61 countries over the period 1980 1997 The authors determined that explicit deposit insurance might be harmful to bank stability especially for those countries with weak institutional regulation however more effective regulation better offset the adverse incentives created by deposit insurance such as moral hazard Gropp and Vesala 2004 investigated the relationship between deposit insurance bank charter values debt holder monitoring and banks risk taking for 128 banks from 15 EU countries during 1992 1998 The research found that the introduction of explicit deposit insurance can considerably decrease banks risk taking the risk taking of banks with a very large share in the banking system showed no effects also after the introduction of explicit deposit insurance some changes in the balance sheet structure of banks towards more insured deposits were observed Angkinand and Wihlborg 2010 based on banking system data from the IMF s Financial Stability reports for sample of 52 countries 14 industrial 32 emerging market 6 developing countries analyzed the relationship of deposit insurance banks ownership state or foreign bank s shareholder and creditor protection and their impact on the coverage of explicit deposit insurance systems that reduces risk taking of banks
