Introductory remarks - Financial crises: the role of deposit insurance
Introductory remarks by Mr Hervé Hannoun, Deputy General Manager of the BIS, at the IADI 2011 Research Conference "Financial crises: the role of deposit insurance", Basel, 8 June 2011.
The vital contribution of deposit insurance to financial stability was one of many lessons from the financial crisis. Even though there is a great variety of deposit insurance arrangements worldwide, all types provide depositors with clarity, reassurance and confidence. This means, first, that deposit insurance forms an integral part of the global financial stability framework. Second, that deposit insurers support a "back to basics" approach to banking supervision. In this respect, strong capital buffers focusing on common equity and a binding Pillar 1 leverage ratio are two central elements of Basel III. And, third, that deposit insurers are key actors in bank crisis management and in bank resolution. In this regard, a key lesson from the crisis is the need for further progress in the design of a cross-border bank resolution framework that can cope with the potential failure of systemically important financial institutions (SIFIs). However, in the current absence of a global resolution framework, it is critical to reduce the default probability of SIFIs by increasing their loss absorption capacity through systemic capital surcharges.