TY - UNPB
T1 - The deposit base – multibanking and bank stability
AU - Hakenes, Hendrik
AU - Schliephake, Eva
PY - 2019/7
Y1 - 2019/7
N2 - To provide maturity transformation, banks need a deposit base – deposits that could be, but are not, withdrawn most of the time and are, thus, used for long-termlending. In a global-games environment, we show that a higher deposit base protects banks against panic runs. As depositors become more flexible in their bank relations, keeping multiple accounts at different institutions, the deposit base of banks changes. We analyze the impact of multi-banking on bank stability and show that in an economy with specialized institutions, households allocate too few funds to maturity-transforming institutions (banks). A policy-maker should support the banks, even though they are more fragile. If only some institutions are protected by deposit insurance, the deposit base moves away from the unprotected institutions, leaving them more prone to runs.
AB - To provide maturity transformation, banks need a deposit base – deposits that could be, but are not, withdrawn most of the time and are, thus, used for long-termlending. In a global-games environment, we show that a higher deposit base protects banks against panic runs. As depositors become more flexible in their bank relations, keeping multiple accounts at different institutions, the deposit base of banks changes. We analyze the impact of multi-banking on bank stability and show that in an economy with specialized institutions, households allocate too few funds to maturity-transforming institutions (banks). A policy-maker should support the banks, even though they are more fragile. If only some institutions are protected by deposit insurance, the deposit base moves away from the unprotected institutions, leaving them more prone to runs.
KW - Bank runs
KW - Deposit base
KW - Global games
KW - Financial stability
U2 - 10.2139/ssrn.3431160
DO - 10.2139/ssrn.3431160
M3 - Preprint
T3 - CRC TR 224 Discussion Paper Series, 2019
SP - 1
EP - 36
BT - The deposit base – multibanking and bank stability
ER -