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Insuring for a Crisis: Deposit Insurance and the GFC, the Australian and New Zealand Experience

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Errata

This article is corrected by:

  1. Errata: Erratum Volume 31, Issue 4, 525, Article first published online: December 2012

  • Correction added on 26 September 2012 after first online publication on 13 September 2012. The article title should be ‘Insuring for a Crisis: Deposit Insurance and the GFC, the Australian and New Zealand Experience’ instead of ‘Insuring for a Crisis: Deposit Insurance and the GFC, the Experience of OECD Countries’. This has been corrected in this version of the article.

Ameeta Jain, School of Accounting, Economics and Finance, Deakin University, 221 Burwood Highway, Burwood, VIC 3125, Australia. Email: ameetaj@deakin.edu.au

Abstract

Deposit insurance schemes were an important element in policy responses to the global financial crisis (GFC). There has been considerable debate about the nature and efficacy of such policy measures in alleviating the fallout from financial crises. The GFC highlighted problems associated with deposit insurance schemes including moral hazard, coverage limits, co-insurance, cross border issues and market distortions. Despite these shortcomings, deposit insurance schemes were able to ameliorate the financial panic experienced and reduce contagion. This paper evaluates the Australian and New Zealand experience with deposit insurance introduced in response to the GFC, and compares this to the OECD experience. It reflects on the performance of deposit insurance schemes considered against the attributes of good policy design, and evaluates the specific problems and strengths encountered during the GFC.

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