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Structuring Deposit Insurance for a United Europe
Author(s) -
Santomero Anthony M.,
Trester Jeffrey J.
Publication year - 1997
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/1468-036x.00036
Subject(s) - deposit insurance , context (archaeology) , structuring , commission , insurance policy , key person insurance , ordination , economics , general insurance , business , actuarial science , finance , computer science , paleontology , machine learning , biology
This paper analyses the difficulties associated with imposing a unified deposit insurance scheme in a unified Europe. Specifically, it investigates the determinants of optimal deposit insurance in light of the Commission's 1994 decision requiring mandatory minimum coverage and encouraging a single unified deposit insurance structure. Issues of deposit insurance premiums and tax burden are analysed in the context of a general equilibrium‐type model. The results indicate that taxes, the optimal degree of deposit insurance, and societal risk aversion are all interrelated in such a structure. Therefore, a common insurance system may not be feasible nor appropriate for a first best solution; co‐ordination and even unified taxation may be necessary. At the minimum, exceedingly close macroeconomic policy co‐ordination will be necessary for the single market for financial services to come to fruition and achieve stability.