Several large banks faced deposit runs in 2023 which led either to default or to ‘shotgun marriages’ with large fiscal costs. This column outlines several policies to limit the risk of self-fulfilling runs and defaults in otherwise solvent institutions. Ex-ante measures such as higher capital requirements and expanded deposit insurance would have the strongest effect, but also highest cost. Alternative contingent measures to reduce run incentives include going concern bail-ins and swing pricing.

Tag-uri: INS