The System of Deposit Insurance and Its Influence on the Risks Assumed by Russian Banks
This paper examines how deposit insurance systems affect the degree of market discipline on bank’s risk-taking. The author uses a rich panel dataset on banks in Russia (including subgroups of big, mainly state owned, banks and small privately owned banks) with covering the period after the introduction of the deposit insurance scheme and different variables to assess risk. The findings suggest that the relationship between bank’s risk taking and deposit insurance coverage can be described as U-shaped as hypothesized. The analysis of the impact of the bank’s size indicates that large banks are associated with moderate risk-taking after the implementation of deposit insurance system.