The impact of deposit insurance on depositor behavior during a crisis: A conjoint analysis approach

We investigate the effectiveness of initiating deposit insurance at the outset of a banking crisis.
Using a conjoint analysis approach that allows us to consider the simultaneous impact of multiple
deposit insurance attributes and various counterfactuals, we ask a multinational sample of
respondents how they would view hypothetical account profiles following the failure of a large
competing bank. Previous experience matters: respondents from countries without explicit deposit
insurance exhibit greater withdrawal risk, suggesting that the introduction of deposit insurance
during a crisis may be only partially successful in preventing bank runs. They also impose a higher
deposit interest rate premium. Having a long‐term bank relationship reduces withdrawal risk, as
does the absence of co‐insurance.


Dr Glenn Boyle

Glenn provides consulting services in the finance area.

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