On Deposit Stability in Failing Banks
(Christopher Martin, Manju Puri and Alexander Ufier)
Discussion
Giuseppe Boccuzzi
FITD; ERC-IADI Chair
Main features
The paper:
• addresses the lack of evidence on deposit funding
stability in failing banks
• uses a novel supervisory dataset of one failed bank
• applies multiple regression models
2
Main results
• Deposit insurance works; it reduces the insured
deposits outflow
• Checking accounts are more stable than savings
accounts
• Term deposits are more risk-averse and run-off
quicker
• Run-off rates are consistent with Basel LCR rules (not
with NSFR ones)
• Bank offset losses of uninsured deposits with new
insured deposits (by means above-market rates on
insured deposits)
3
Remarks and suggestions
• Definition of the liquidation event
• «Cross-products» depositors
• Market discipline and insured deposits interest rate
• Caution when extrapolating results
4
Our empirical evidence
4 Resolved Banks in Italy
Evolution of total funding (bonds+deposits) and total deposits
Index numbers
140%
120%
100% 100%
100%
117%
111% 111% 110% 111%
114%
110%
96%
88%
85%
81%
76%
80%
72%
69%
59%
60%
Special administrations
55%
54%
Total Deposits
Total Funding
40%
Resolution
Resolution
20%
0%
Source: Boccuzzi, De Lisa, (2017), Does bail-in definitely rule out bailout?
5
56%
Evolution of deposits – Index numbers
150%
140%
Insured
130%
120%
Total
Total
110%
100%
Total Deposits
90%
Special administrations
Uninsured
Uninsured
80%
70%
60%
Resolution
50%
Source: Boccuzzi, De Lisa, (2017), Does bail-in definitely rule out bailout?
6
Uninsured
Insured
Evolution of insured deposits - Quarterly change rates - %
15%
9,6%
10%
4,5%
3,8%
5%
2,7%
-0,1%
1,3%
0,6%
1,5%
1,6%
1,8%
0,5%
0,8%
0,9%
-0,7%
0%
0,1%
-0,3%
0,0%
-1,1%
Special administrations
-5%
All
Big Banks
The 4 Banks
-7,9%
-10%
-7.9%
Resolution
-15%
Evolution of uninsured Deposits - Quarterly change rates - %
25%
12,3%
15%
5,0%
5%
1,0%
0,7%
-2,4%
-5%
5,9%
1,9%
-1,3% -0,2%
-3,5%
-6,1% -6,2%
1,6%
-2,8%
1,1%
-5,1%
Big Banks
-15%
The 4 Banks
-25,4%
-25%
Resolution
7
-3,9%
All
Special administrations
-35%
2,7%
-25.4%
Evolution of deposits – Index numbers
150%
140%
Insured
130%
120%
Total
Total
110%
100%
90%
80%
Special administrations
Uninsured
Total Deposits
Uninsured
Insured
70%
60%
Resolution Uninsured
50%
Source: Boccuzzi, De Lisa,
(2017), Does bail-in definitely
rule out bailout?
8
Ongoing discussion
• What about funding stability in the new
regulatory framework?
From bail-out to bail-in.
• More complexity to be addressed
9