Bank failure management - the role of deposit insurance

Managing bank failures is complex and costly. One way to expand the toolbox and fund its use is through the role of deposit insurance schemes (DIS). Where permitted by the applicable legal framework governing deposit insurance and crisis management, DIS may facilitate and support alternative measures to payout of insured deposits. Based on survey responses from around 50 International Association of Deposit Insurers (IADI) members, the paper reviews practices for the use of DIS resources for alternative measures. More than 30 of those DIS can help fund alternative measures, such as purchase and assumption transactions, bridge banks, or capital and liquidity support. The paper discusses how DIS support for these measures can complement bank insolvency and resolution frameworks and expand the toolbox for bank failure management.

JEL classification:  G21, G28, G33