Liquidity in Resolution: Estimating Possible Liquidity Gaps for Specific Banks in Resolution and in a Systemic Crisis

Parisi, Laura; Chalamandaris, Dimitrios; Amamou, Raschid; Torstensson, Pär

doi:10.2139/ssrn.3727927

Cited by 1 publication

(1 citation statement)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…When current banking sector conditions threaten financial stability, the decision to initiate resolution may result in large deposit outflows (both insured and non-insured). During a nine-month period beginning in June 2012, Cyprus Popular Bank recorded a 40% run-off rate amounting to EUR 10bn of deposit outflows (Amamou et al , 2020). Consequently, market confidence weakened, and the entire financial system was threatened.…”

Section: Literature Reviewmentioning

confidence: 99%

Resolution and depositors’ trust empirical analysis of three resolution cases in Poland

Iwanicz-Drozdowska

Kurowski

Witkowski

2023

QRFM

View full text Add to dashboard Cite

Purpose This paper aims to evaluate the role of depositor-specific features in a bank resolution. As the resolution framework in the EU is rather new, there are no empirical studies referring to the efficiency of this mechanism in protecting financial stability. Thus, the authors have checked the role of societal awareness of deposit guarantee schemes and the resolution, as well as the trust in public institutions, in avoiding bank runs in the case of resolution scenarios. Design/methodology/approach The study is based on telephone interviews conducted with 1,000 Poles, including bank customers whose banks have undergone resolution in recent years, and basic statistics of the resolved banks. The authors then apply two classes of models: binary probit regression and ordered probit regression. Findings The findings have indicated that the trust in public institutions and the experience gained with age play a key role in overall depositor behaviour. However, for resolutions, declared trust is replaced by case-specific trust based on the obtained information. Research limitations/implications The survey is based on a sample of Polish citizens. In the future, international surveys may help diagnose cross-country differences among depositors. Moreover, studies on communication approaches may also support finding highly effective ways to reach various cohorts of depositors. Originality/value The existing literature on depositor behaviour in bank failure scenarios has relied on an experimental approach to test various research hypotheses. The research sample is not based on an experiment but on the responses of customers whose banks have actually undergone resolution.

show abstract

Section: Literature Reviewmentioning

confidence: 99%