Good morning. Let me begin by thanking the International Association of Deposit Insurers (IADI) for inviting me to address their Annual Conference and our hosts, the Compensation Scheme of German Private Banks and the Deposit Protection Fund of the Association of German Banks, for their generous hospitality. It is a pleasure to be here in Berlin.
This conference addresses a critical topic: how deposit insurance systems need to evolve and adapt to ensure that deposit insurance continues to meet its policy objectives in a changing financial landscape. This is a question that is confronting all institutions that make up the financial safety net. Rapid innovation is raising fundamental questions about whether the frameworks in place are adequate in the face of new risks.
The panels that follow will unpack these questions. I would like to offer some observations that might help frame those discussions.
1. The evolving role of deposit insurers
Although this is an audience of experts, it is worth reiterating why we have deposit insurance. Its principal objectives are to help support financial stability and public confidence in the banking system by protecting less financially sophisticated depositors from the loss of their deposits when a bank fails.
That objective does not necessarily require a deposit insurance system. A public sector backstop could guarantee deposits. Indeed, this has happened in the absence of explicit deposit insurance and is even used on occasion to supplement deposit insurance if its coverage is considered insufficient to prevent a wider loss of confidence. The central bank, in its role as lender of last resort, can provide the necessary liquidity for a bank to meet its obligations where market funding fails.
However, a core feature of deposit insurance systems is the way in which they are funded. Since the first international guidance on this topic in the 2001 report of the Financial Stability Forum (FSF),1 it has been a key principle that the deposit insurance is funded by member banks. Deposit insurance is a formal arrangement for mutualising the costs of bank failure. In 2001, there were strong concerns about the moral hazard associated with that burden-sharing. The FSF report had to engage with the contention that insured banks will take on too much risk. That argument has now been won. By setting deposit insurance limits, protection is targeted at retail depositors whose ability to exert discipline over banks is limited. Any moral hazard associated with that protection is mitigated by a range of measures, including capital requirements, other prudential regulation and effective resolution regimes through which losses are imposed on shareholders and creditors.
Since the FSF report, much has changed. IADI was established in 2002 and published the first version of the Core principles for effective deposit insurance systems in 2009 – the first international standard to be adopted in response to the Great Financial Crisis. Deposit insurance systems are now widespread, and the mandates of deposit insurers are expanding.
The evolving role of deposit insurers is largely driven by two related factors. The first is the recognition that their mandates are, in many circumstances, delivered most efficiently by measures that preserve continued access to deposits and related services. The 2026 IADI Global Trends Report indicates a steady move away from paybox-only models. This trend is concurrent with the implementation of resolution frameworks globally. Over 80% of IADI members have a wider mandate that includes some role in non-payout resolution, ranging from funding measures that preserve access to deposits to executive resolution authority.
The second is that effective failure management requires funding. There are three broad sources of such funding: banks’ internal loss-absorbing capacity (or LAC); external, industry-sourced funding such as deposit insurance funds; and public funding for exceptional circumstances.
The rationale for the international framework means that, at least for systemic institutions, internal LAC should be a primary source of resolution funding. Hence, the Financial Stability Board (FSB) supplemented the Key Attributes of Effective Resolution Regimes for Financial Institutions with the total loss-absorbing capacity (TLAC) standard for G-SIBs and some jurisdictions, including the European Union, have extended resolution-related LAC requirements to other banks.
However, there are limits to reliance on internal resources alone. The costs of resolution are unpredictable and there can never be absolute confidence that LAC will be sufficient. Moreover, depending on the form of instrument it takes, LAC may have been significantly depleted prior to failure. Furthermore, we need to be realistic. LAC materially above regulatory capital is not compatible with all business models. This is particularly a problem for small and medium-sized banks. External funding sourced from industry therefore remains crucial for failure management.
Recent developments confirm the importance of the deposit insurer in this regard, even in jurisdictions where there is also a bespoke resolution fund. Since we are in Europe, I will mention the EU Crisis Management and Deposit Insurance reforms – or CMDI – adopted earlier this year. Its changes include an expanded role for funding by EU deposit insurance schemes in transfer-based resolutions of smaller banks.2 This reform should help expand options for managing bank failures and is consistent with the global direction of travel in the role of the deposit insurer.
2. The design of deposit insurance systems – current debates and challenges ahead
However, the financial landscape is changing at a perhaps unprecedented pace. Our current crisis management frameworks were developed in response to previous crises affecting regulated financial institutions – mainly banks – and largely driven by concerns about solvency or liquidity stress. Future crises may be different. In the face of rapid change, we cannot rest on our achievements since the last major financial crisis. We must at least review the crisis management framework and consider the appropriate measures to respond to new types or sources of risk.
Without claiming to have a crystal ball, I would classify the foreseeable risks into three broad policy areas.
- First, risks to regulated financial institutions may come from sources outside the regulatory perimeter.
- Second, emerging technologies introduce new vulnerabilities. Digital bank runs risk faster failures. Digital networks and communication channels may amplify stress events. Risks of severe operational incidents increase.
- Third, new forms of money or payment are emerging that could bring risk if adopted at scale.
I will add some thoughts on these three areas.
Sources of risk from outside the regulatory perimeter
First, there are risks from outside the regulatory perimeter. Market-based finance is a potential source of stress and failures of non-bank financial institutions (NBFIs) may give rise to significant disruption, even if they are not themselves systemic. While the sources of risk do not fall within the scope of deposit insurers’ responsibilities, the resultant stress could affect the banking sector. Stress episodes such as the Archegos failure in 2021 and the severe disruption in the UK gilt market in September 2022 have demonstrated how stress from outside the regulatory perimeter can transmit throughout the system.
However, individual crisis episodes provide only a partial picture. We need to understand better the channels for transmission of stress to the regulated sector and, building on that, to consider what containment measures could limit such transmission. This potentially far-reaching conversation is beginning in international bodies such as the FSB and is relevant to the entire financial safety net. It does not imply that the inevitable response is an extension of resolution regimes beyond their current scope. However, measures such as access to central bank liquidity backstops for certain NBFIs might be considered, where accompanied by an appropriate framework for regulation and supervision.
Vulnerabilities from emerging technologies
Moving to vulnerabilities from emerging technologies, digitalisation is having an impact on behaviour. Technology has facilitated an easier and faster transfer of deposits and there is evidence that communication within networks had an influence on some recent bank runs. For example, a concentrated deposit base linked through overlapping virtual communities may have contributed to synchronised deposit outflows that precipitated the failure of Silicon Valley Bank. These factors produce an environment where deposits are potentially less stable and failures may happen faster. Since we cannot stay the direction of travel, the response from safety net participants has been to intensify focus on operational preparedness supported by the right capabilities and effective crisis communication. A rapid crisis response also depends on close collaboration between supervisors, resolution authorities, central banks and deposit insurers, and there is more work to be done to ensure coordinated and complementary action along the crisis continuum.
Risks of a severe operational incident are also increasing steeply. The potential scenarios are wide-ranging. They include cyber incidents, outages of critical third-party service providers which could disrupt market functioning, block access to critical data and affect confidence. Sustained operational disruption will quickly undermine confidence and, in one case in recent years, has forced the closure of a bank. Here we are in uncharted territory. Our current crisis framework was not designed for such scenarios. Work is needed to plan for a joined-up response from all the relevant authorities – which may be wider than the traditional safety net.
New forms of money
The third policy area is new forms of money. This is of particular relevance to deposit insurers since it raises fundamental questions about what products should be protected.
We are seeing the emergence of digital products that potentially offer an alternative to bank deposits as a means of payment. Some, such as tokenised deposits and stablecoins, promise attractive features absent from traditional deposits, for example faster and cheaper cross-border payments and the ability to integrate with smart contracts. To date, levels of adoption and transaction volumes are globally low. However, incipient risks are present. For example, while no stablecoin is yet systemic, runs in this sector could affect confidence. Should their role in payments increase, the impact could be wider. Moreover, from the perspective of users, they may functionally resemble deposits. Given this, is it appropriate or desirable to extend a form of deposit insurance to protect users and mitigate potential risks to financial stability?
When considering this question, it is useful to go back to basics and keep in mind the role of deposit-taking in the financial system and the reasons why bank deposits are protected. Two elements are important. The first is the unique role of bank deposits in the supply of credit to the general economy and the vulnerabilities to runs created by the maturity and risk transformation this entails. This is to say, deposit insurance is linked to the public interest in bank credit intermediation and the mitigation of run risks that accompany that activity. The second is the dominant role of deposits in payments. This is founded in their stable value, meaning they are redeemable at par against fiat currency, and the high level of trust in that stability.
How do digital products measure up against this? I will take the example of asset-backed stablecoins, since there are significant expectations about this technology in some quarters. Experience so far suggests that they lack the stability of value against fiat currency and, importantly, they are not directly linked with the socially valuable activity of credit intermediation. A core policy rationale that underlies deposit insurance is missing.
Despite this, do financial stability considerations argue for some form of protection to be extended to stablecoins? A stablecoin run could pose risks to broader financial stability if it triggered a fire sale of reserve assets or caused stablecoin issuers to withdraw funds from their bank deposits to meet redemptions. This raises important questions about the role of possible backstops and the regulatory requirements that should accompany them to mitigate moral hazard.3
In principle, arrangements analogous to deposit insurance could reduce the risks of a run. However, those risks can also be mitigated by measures that are typically features of frameworks for regulated stablecoins. These include rules on safeguarding of assets backing stablecoins, requirements for issuers to hold capital against the risk of a shortfall in the value of those assets and a robust legal claim for holders for the value of their stablecoins against the issuer. A 2025 FSB peer review4 found material gaps in the implementation of such measures under existing cryptoasset frameworks – gaps which need to be filled before their efficacy can be assessed.
If stablecoins are not covered by any form of protection, it will be important to build public awareness of this fact. Clear communication about the scope of protection is crucial to address misconceptions about the status of other instruments that may be seen as deposit-adjacent. Public awareness is a field in which deposit insurers have proven skills, and they have a key role to play.
I have focused on stablecoins, but these are not the only new form of money contending for a role in payments. So let me touch briefly on tokenised deposits since these, like stablecoins, use tokenisation to be represented digitally on programmable platforms. They differ, however, in that account-based tokenised deposits are tied to an issuing bank. Tokenised deposits therefore preserve the link between deposit-taking and credit provision that I have suggested is an important, public interest justification for protection. Logic therefore suggests that that digital instruments representing insured deposits should be subject to the same protection.
This is not to overlook operational complexities, for example in reimbursement process, that deposit insurers would have to resolve if a payout were required. This question is largely theoretical at present since pilot projects for tokenised deposits focus on wholesale deposits held by large institutional clients and the infrastructure for their widespread use in payments is not yet in place. My point is simply that there is a rationale for distinguishing between forms of digitalised product when considering whether a form of protection should be part of the regulatory approach. This is consistent with the stance taken in several jurisdictions that tokenisation does not change the fundamental nature of a depositor’s claim and the regulatory classification of a liability as a deposit. If that decision is taken, communicating it is important since the potential for public confusion about the protected status of various forms of tokenised instrument is high.
3. Closing
Let me briefly conclude. In the quarter century since the first international guidance, deposit insurance has become a core element of a stronger financial safety net, supporting financial stability and evolving in a way that integrates it more deeply into the arrangements for bank failure management. Nevertheless, we are in a period of rapid, sometimes dizzying, technological advancement. There will be benefits, but the risks also loom large in our international conversations.
Changes will be needed to crisis management frameworks to manage the impacts of new risks. However, the proven effectiveness of deposit insurance in mitigating contagion risk does not mean that similar protections are necessarily appropriate for all new products that aspire to provide some deposit-like functionalities. Any decision to extend deposit insurance to such products should be based on whether they provide the same social value as bank deposits.
IADI is already engaging with some of these challenges. The Core Principles have recently been updated to reflect the evolving role of deposit insurers and anticipate changes that technological innovation will unleash in the financial system. In July IADI published an excellent report that considers the implications of the new and emerging digital products, players and business models for deposit insurance.5 Building on that work, I am sure that the discussion today will be rich.
Thank you.
References
Bank for International Settlements (BIS) (2026): “Anchoring trust in money: innovation beyond stablecoins”, Annual Economic Report, ch III, June.
Financial Stability Board (FSB) (2025): Thematic review on FSB global regulatory framework for crypto-asset activities.
Financial Stability Forum (FSF) (2001): Guidance for developing effective deposit insurance systems.
International Association of Deposit Insurers (IADI) (2026a): Deposit insurance in 2026: Global Trends Report.
——— (2026b): Financial innovation and digitalisation: Impact on deposit insurance systems.
Restoy, F, R Vrbaski and R Walters (2026): “The reform of the crisis management and deposit insurance framework (CMDI) in the banking union: is it the solution?”, Forum on Financial Supervision, Systemic Risk Centre.
