Blanket Guarantees

The expansion of deposit insurance and introduction of debt guarantees have played a crucial role in containing the financial crisis while giving governments time to develop suitable policy responses. But these measures do not address the root causes of the crisis, and they lead to competitive distortions, moral hazard, and large fiscal contingent liabilities. Rolling them back is likely to require an internationally coordinated effort and an answer to the important question, 'exit to what?'

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Bibliographic Details
Main Authors: Feyen, Erik, Vittas, Dimitri
Language:English
Published: World Bank, Washington, DC 2009-06
Subjects:ACCESS TO FUNDS, ACCESS TO INSURED DEPOSITS, ASSETS, ASSOCIATION OF DEPOSIT INSURERS, BANK ACCOUNTS, BANK BRANCHES, BANK DEBT, BANK DEPOSITS, BANK FAILURE, BANK HOLDING, BANK HOLDING COMPANIES, BANK LIABILITIES, BANK PERFORMANCE, BANK RUN, BANK RUNS, BANKING CRISES, BANKING CRISIS, BANKING INDUSTRY, BANKING SUPERVISION, BANKING SYSTEM, BANKING SYSTEM STABILITY, BANKING SYSTEMS, BANKRUPTCY, BASIS POINTS, BLANKET GUARANTEES, BONDS, CAPITAL ACCOUNT, CAPITAL FLOWS, CAPITAL OUTFLOWS, CDS, CERTIFICATES OF DEPOSIT, COINSURANCE, COMMERCIAL BANKS, COMMERCIAL PAPER, COMMITMENT DEVICES, CONTAGION, CONTINGENT LIABILITIES, COVERAGE ARRANGEMENTS, COVERAGE CEILING, COVERAGE OF DEPOSIT, COVERAGE OF DEPOSIT INSURANCE, CREDIBILITY, CREDIBILITY OF DEPOSIT INSURANCE, CREDIT DEFAULT, CREDIT DEFAULT SWAP, CREDIT EXPANSION, CREDIT GUARANTEE, CREDIT GUARANTEE SCHEME, CREDITOR, DEBT GUARANTEE, DEBT GUARANTEES, DEBT ISSUANCE, DEBT ISSUES, DEBT MARKETS, DEFAULT RISK, DEPOSIT, DEPOSIT COVERAGE, DEPOSIT INSURANCE, DEPOSIT INSURANCE ARRANGEMENTS, DEPOSIT INSURANCE CORPORATION, DEPOSIT INSURANCE COVERAGE, DEPOSIT INSURANCE DESIGN, DEPOSIT INSURANCE INCREASE, DEPOSIT INSURANCE SCHEMES, DEPOSIT INSURANCE SYSTEMS, DEPOSIT LOSS, DEPOSIT PROTECTION, DEPOSIT PROTECTION SCHEME, DEPOSITOR, DEPOSITOR LOSSES, DEPOSITS, DESIGN OF DEPOSIT INSURANCE, DOMESTIC BANKING, DOMESTIC BANKS, DOMESTIC CREDIT, DOMESTIC LIQUIDITY, EFFECTIVE DEPOSIT INSURANCE, EFFECTIVENESS OF DEPOSIT INSURANCE, EMERGING ECONOMIES, EXCESSIVE RISK, EXCHANGE RATE, EXISTING DEBT, EXPLICIT DEPOSIT, EXPLICIT DEPOSIT INSURANCE, EXPLICIT DEPOSIT INSURANCE SCHEME, EXPLICIT DEPOSIT INSURANCE SCHEMES, FAILING BANKS, FEDERAL DEPOSIT INSURANCE, FEDERAL DEPOSIT INSURANCE CORPORATION, FEDERAL HOME LOAN, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DEVELOPMENT, FINANCIAL INSTITUTIONS, FINANCIAL INTEGRATION, FINANCIAL MARKET, FINANCIAL MARKETS, FINANCIAL REFORMS, FINANCIAL SAFETY, FINANCIAL SAFETY NET, FINANCIAL SAFETY NETS, FINANCIAL SYSTEM, FISCAL RESOURCES, FORBEARANCE, FOREIGN BANK, FOREIGN BANKS, FOREIGN BRANCHES, FOREIGN CURRENCY, FOREIGN CURRENCY DEPOSITS, FOREIGN EXCHANGE, FOREIGN EXCHANGE RESERVES, FOREIGN LIABILITIES, FULL BLANKET GUARANTEES, FUTURE FINANCIAL CRISES, GOVERNMENT GUARANTEES, GOVERNMENT INTERVENTIONS, GOVERNMENT SUPPORT, HIGHER DEPOSIT RATES, HOME LOAN, HOME LOAN BANKS, HOST COUNTRY, INCENTIVE OF DEPOSITORS, INDIVIDUAL BANKS, INDIVIDUAL DEPOSITORS, INSOLVENT, INSTITUTIONAL CAPACITY, INSTITUTIONAL INVESTORS, INSTRUMENT, INSURED BANK, INSURED DEPOSITS, INVESTOR CONFIDENCE, JUNIOR DEBT, JURISDICTIONS, LARGE BANKS, LARGE DEPOSITORS, LAST RESORT, LENDER, LENDER-OF-LAST-RESORT, LENDER-OF-LAST-RESORT FACILITIES, LEVEL PLAYING FIELD, LIQUIDATIONS, LIQUIDITY, LIQUIDITY SUPPORT, LOCAL BANKS, MARKET CONDITIONS, MARKET DISTORTIONS, MARKET PARTICIPANTS, MATURITIES, MATURITY, MONETARY FUND, MONEY MARKET, MORAL HAZARD, MORAL HAZARD PROBLEM, MORTGAGE, MORTGAGE LENDING, MUTUAL FUNDS, NONBANK FINANCIAL INSTITUTIONS, OUTSTANDING BALANCES, POLICY RESPONSES, PRIVATIZATION, PUBLIC FUNDS, PUBLIC POLICY, PUBLIC SECTOR DEBT, RATE OF EXCHANGE, RECESSION, REGULATORY FRAMEWORK, REGULATORY FRAMEWORKS, RETURN, RISK PROFILES, RISK-BASED PRICING, SAVINGS, SENIOR DEBT, SHORT-TERM DEBT, SMALL DEPOSITORS, SOLVENCY, SOLVENT, SOLVENT BANKS, SOVEREIGN DEBT, SOVEREIGN DEBT MARKETS, STRUCTURE OF DEPOSIT, SUBORDINATED DEBT, SUBSIDIARIES, SUBSIDIZATION, TIER 1 CAPITAL, TRADITIONAL DEPOSIT, TRANSACTION, TRANSACTION ACCOUNTS, UNDERLYING ASSET, UNINFORMED DEPOSITORS, UNION, UNLIMITED PROTECTION, UNSECURED BONDS, UNSECURED DEBT, WEAK BANKS, WHOLESALE FUNDING, WITHDRAWAL,
Online Access:http://documents.worldbank.org/curated/en/2009/06/11092340/blanket-guarantees
https://hdl.handle.net/10986/10248
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Summary:The expansion of deposit insurance and introduction of debt guarantees have played a crucial role in containing the financial crisis while giving governments time to develop suitable policy responses. But these measures do not address the root causes of the crisis, and they lead to competitive distortions, moral hazard, and large fiscal contingent liabilities. Rolling them back is likely to require an internationally coordinated effort and an answer to the important question, 'exit to what?'