Agenda

06 May 2026 12:15

Jose-Luis Peydro (LUISS)

Meeting Room 1, San Giobbe Economics Campus

 

Jose-Luis Peydro (LUISS) - Distortive Effects of Deposit Insurance: Administrative Evidence from Deposit and Loan Accounts

Abstract
We study how increasing deposit insurance coverage during a crisis distorts deposit and credit allocation. Exploiting a reform of Denmark's deposit insurance scheme during the Global Financial Crisis with comprehensive administrative datasets, we analyze the effects on deposit allocation. We find that individual depositors impose market discipline on weaker banks through withdrawals of uninsured deposits, but expanded insurance coverage disrupts this mechanism. This disproportionately benefits weaker banks, enabling them to expand lending to lower-quality firms that subsequently default without appropriate risk pricing. Our results highlight the trade-off between short-term financial stability and the costs of increasing deposit insurance coverage.

Language

The event will be held in English

Organized by

Department of Economics (EcSeminars)

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