Post-Resolution Treatment of Depositors At Failed Banks: Implications for the Severity of Banking Crises, Systemic Risk, and too-Big-To-Fail

June 1, 2001

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George G. Kaufman, and Steven A. Seelig Post-Resolution Treatment of Depositors At Failed Banks: Implications for the Severity of Banking Crises, Systemic Risk, and too-Big-To-Fail, (USA: International Monetary Fund, 2001) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Losses may accrue to depositors at insolvent banks both at and after the time of official resolution. Losses at resolution occur because of poor closure rules and regulatory forbearance. Losses after resolution occur if depositors' access to their claims is delayed or "frozen." While the sources and implications of losses at resolution have been analyzed previously, the sources and implications of losses after resolution have received little attention. This paper examines the causes of delayed depositors' access to their funds at resolved banks, describes how the FDIC provides immediate access, reports on a special survey of access practices in other countries, and analyzes the costs and benefits of delayed access in terms of both the effects on market discipline and depositor pressure to protect all deposits.

Subject: Bank deposits, Bank resolution, Bank solvency, Banking, Deposit insurance, Distressed institutions, Financial crises, Financial institutions, Financial sector policy and analysis, Financial services

Keywords: Access delay time., Bailout pressure, Bank deposits, Bank failure, Bank resolution, Bank solvency, Banking crisis, Delay time, Deposit insurance, Depositor access, Depositor discipline, Depositor monitoring, Depositor ownership, Depositor pressure, Distressed institutions, Insurance agency, Systemic risk, Uninsured depositor, Unprotected depositor, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/083
Stock No:

WPIEA0832001
ISBN:

9781451850543
ISSN:

1018-5941

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