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Tomasz Obal Basel , May 2007

Deposit Insurance Cross-Border Issues Burden-sharing. Tomasz Obal Basel , May 2007. Burden-sharing. Determination of the problem issues in the broad perspective who should cover the costs? who should take the risk?. Players: Banks Customers State (taxpayers)

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Tomasz Obal Basel , May 2007

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  1. Deposit InsuranceCross-Border IssuesBurden-sharing Tomasz Obal Basel, May 2007

  2. Burden-sharing • Determination of the problem issues in the broad perspective • who should cover the costs? • who should take the risk? • Players: • Banks • Customers • State (taxpayers) • Safety net institutions • Supervision • Deposit Insurance Schemes • Factors for analyses: • risks (financial, moral hazard, others) • financial costs • TBTF doctrine

  3. Burden-sharing Identification of the crisis situation simple model I. direct operations Mother Bank Crisis II. branch III. subsidiary border Much more complicated situation in case of multinational corporation

  4. Burden-sharing EU polygon for empirical analyses of „free cross-border banking” The same regulations for all countries Home country principle Now 16

  5. Burden-sharing Home country principle DIS facing bank’s failure Simple model Mother Bank I. direct operations II. branch Financial risks -partly loss for customers Operational risk Other risks (reputation) • Financial risks • -Banks • Possible Taxpayers • Operational risk ex-post / ex-ante model is there any difference ?

  6. Burden-sharing Questions in more complicated model Cross-border risk minimizers • Goals: • to minimize risks • to minimize costs What costs and risks ? Which banks are „too big”, which are „too important”? - TBTF doctrine

  7. Thank you Basel May 2007

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