Whenever a crisis hits, interest in guarantee arrangements rises. The current financial crisis is no exception in that respect. It puts the spotlight on the operation of the financial safety net and provides policy makers with a timely opportunity to monitor its performance, with a view to identifying its strengths and weaknesses. The present note focuses on the way parts of the financial safety net are combined, putting special emphasis on deposit insurance and its interaction with other safety net elements. While it also includes a discussion of recent policy actions in that context, the note centres on structural rather than practical crisis resolution issues.
At its meeting in March 2008, the OECD Committee on Financial Markets (CMF) discussed selected financial safety net issues within the Tour d’Horizon on Financial Markets based on a background note prepared by the Secretariat. The note highlighted the importance of various aspects of the design of financial safety nets and in particular of explicit deposit insurance systems. It argued that it was too early to draw any strong policy lessons from recent developments regarding the effects of the turbulence and the adequacy of the financial safety net, but that some preliminary lessons were emerging concerning selected aspects of the design of deposit insurance systems. These included that, as regards coverage, deposit insurance systems with low levels of coverage and/or partial insurance may not be effective in preventing bank runs.
The majority of Western models of mediation have been based on a number of premises that suggest a rational, staged, largely emotion-free, present- and future-based approach to conflict resolution, with a focus on principles of mediator neutrality and impartiality, confidentiality and measurable outcomes (Boulle, 1996; Fisher and Brandon, 2002; Folberg and
If there is anything that is clear from development economics literature over the last two decades it is this: credit markets matter. From Stiglitz and Wiess (1981) to Banerjee and Duflo (2002), both theory and evidence have shown that credit markets are not perfect problems of moral hazard, adverse selection, and contract enforcement lead to credit rationing. Countries, people, or regions that can make credit markets more efficient have benefited and will continue to benefit from a higher GDP.
Beck, Demirguc-Kunt, and Levine (2000) compare financial markets in developed countries to those in developing countries, revealing that economies grow faster, industries depending on external finance expand at higher rates, new firms are created more easily, and firms grow more rapidly in economies with higher levels of overall financial sector development and in countries where legal systems more effectively protect the rights of outside investors.
