Template-Type: ReDIF-Paper 1.0
Title: Bank Resolution, Deposit Insurance, and Fragility
Author-Name: Alkis Georgiadis-Harris
Author-Email: alkisgharris@gmail.com
Author-Name: Maxi Guennewig
Author-Email: mguennewig@uni-bonn.de
Classification-JEL: G18, G21, G32
Keywords: Bank Resolution, Deposit Insurance, and Fragility

Abstract: Since the Great Financial Crisis, the share of deposits—both insured and uninsured—in bank
liabilities has increased substantially. In this paper, we document this fact for the largest US
banks. We show that it can be theoretically explained by the introduction of resolution powers,
i.e. the ability to impose losses on bank shareholders and creditors. In such a world, banks issue
deposits in order to channel resources towards uninsured depositors, imposing losses on insured
depositors and forcing the government to conduct bailouts. Our model suggests that resolution
and deposit insurance must be complemented by equity or long-term debt requirements.

Note: 
Length: 50
Creation-Date: 2023-12
Revision-Date:
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp477
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2023_477