Guarantee Deposit Schemes - Optimal Level of Coverage in the European Union

Álvaro Copado Matínez

Student thesis: Master thesis

Abstract

This Master’s Thesis investigates the characteristics of a Guarantee Deposit Scheme (GDS), focusingthen on the European Union. It is often ignored that local idiosyncrasies should be taken intoaccount so as to provide a clear picture of the optimal level of coverage required in differentcountries. This study is meant to analyze the current coverage level, harmonized at the level of100,000€, and compare it to the individual optimal coverage level per country based on a newlydeveloped model by Dávila & Goldstein (2016). It is first found that the current optimal level is farfrom being harmonized, and that the main parameter that distorts it is the default probability in thebanking system. In general, differences across European members turn palpable when these aregrouped according to their region, so that from the North to the South, local parameters becomepoorer in value, which drives the optimal coverage level down. Finally, it is argued that theEuropean Union sees the common GDS as an instrument for protecting banks, rather thandepositors as such.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2015
Number of pages99
SupervisorsJimmy Martínez-Correa