Was the Bank Holiday of 1933 Caused by a Run on the Dollar?

1987 ◽  
Vol 47 (3) ◽  
pp. 739-755 ◽  
Author(s):  
Barrie A. Wigmore
Keyword(s):  
New York ◽  
Foreign Exchange ◽  
Federal Reserve ◽  
Deposit Insurance ◽  
Banking System ◽  
Domestic Currency ◽  
New Information ◽  
The Stability ◽  
Specific Timing

International, rather than domestic, causes of both the Bank Holiday of 1933 and the calm in the banking system that followed are emphasized here. New information on gold losses by the New York Federal Reserve, rather than domestic currency hoarding, serve to explain the Bank Holiday's specific timing. Expectations that Roosevelt would devalue the dollar stimulated much of the gold loss. I also argue that Roosevelt's restrictions on gold holdings and foreign exchange dealings and his devaluation of the dollar by 60 percent were more important to the stability of the banking system after the Bank Holiday than was deposit insurance.

scholarly journals Measurement of Systemic Risk in a Common European Union Risk-Based Deposit Insurance System: Formal Necessity or Value-Adding Process?

Risks ◽  
2018 ◽  
Vol 6 (4) ◽  
pp. 137 ◽  
Author(s):  
Aida Barkauskaite ◽  
Ausrine Lakstutiene ◽  
Justyna Witkowska
Keyword(s):  
European Union ◽  
Systemic Risk ◽  
Deposit Insurance ◽  
Current System ◽  
Banking System ◽  
Risk Indicators ◽  
Insurance Fund ◽  
Insurance System ◽  
Deposit Insurance System ◽  
The Stability

Scientific discussions have emphasized that the main problem with the current deposit insurance system is that the current system does not evaluate the risks that banks assume to calculate the deposit insurance premiums in many countries of the European Union (E.U.). Thus, the prevailing system does not safeguard a sufficient level of stability in the banking system. Scientific studies show that the deposit insurance system should consider not only the risk indicators for individual banks, but it must also consider the systemic risk of banks that affects the stability of the banking system. Hence, the question arises as to whether measurements of systemic risk in a common E.U. risk-based deposit insurance system are a formal necessity or if they are a value-adding process. Expanding the discussion of scientists, this article analyzes how contributions to insurance funds would change the banks of Lithuania following the introduction of the E.U.’s overall risk-based deposit insurance system and after taking into consideration the additional systemic risk. The research results that were obtained provide evidence that the introduction of a risk-based deposit insurance system would redistribute payments to the deposit insurance fund between banks operating in Lithuania, and, thereby, would contribute to a reduction in the negative effects of the deposit insurance system and would improve the stability in the financial system.

Deposit Insurance

2019 ◽  
pp. 1-29 ◽  
Author(s):  
Sushma Nayak ◽  
Abhishek Behl ◽  
Aastha Behl
Keyword(s):  
Deposit Insurance ◽  
Institutional Environment ◽  
Banking System ◽  
Market Discipline ◽  
Regulatory Framework ◽  
Bank Runs ◽  
Indian Government ◽  
Maximum Coverage ◽  
Banking Structure ◽  
The Stability

Deposit insurance is intended for providing security to depositors from the standpoint of averting bank runs. It is crucial for nations to examine their institutional environment, banking structure, and regulatory framework before insuring deposits in the interest of maintaining market discipline. In the case of India, while Deposit Insurance and Credit Guarantee Corporation (DICGC) has been contributing appreciably to the stability of Indian banking system by safeguarding depositors against possible loss of their entitled deposits with insured banks, the system is based on “paybox” mandate and affords limited conditional protection to depositors. Guided by the need for a stronger resolution mechanism, the Indian government introduced the Financial Resolution and Deposit Insurance (FRDI) Bill in August 2017, which had its own share of controversies, conceivably the most confounded provisions being the bail-in clause and omission of explicit declaration of maximum coverage. The economic and political pressures, however, led to the dropping of the Bill in July 2018, thus creating further vacuum in an already underprovided deposit protection.

scholarly journals Narrow Banking from the Perspective of Risk

2019 ◽  
Vol 4 (343) ◽  
pp. 53-72
Author(s):  
Jacek Pera
Keyword(s):  
Deposit Insurance ◽  
Banking System ◽  
Financial System ◽  
Financial Sector ◽  
Risk Level ◽  
Partial Loss ◽  
Research Hypothesis ◽  
The Stability ◽  
The Cost ◽  
Size And Structure

The aim of this article is to identify risks arising from the attempt to stabilise the banking system with the use of narrow banking, which in practice means imposing restrictions on various types of assets held by banks and on handling current deposits. To this end, the following will be discussed: the nature and concepts of narrow banking and the risks of narrow banking. The research hypothesis is as follows: narrow banking is an effective concept to use to secure the stability of the financial system. The principal risk connected with the implementation of the concept of narrow banking results from: the cost of deposit insurance, partial loss of banks’ efficiency, mismatching of structures of assets and liabilities of the bank (resulting in GAP), as well as the size and structure of loans for the non‑financial sector. As a result of the conducted analysis, 6 indirect risks were identified, each for the assumed risk level: low, medium and high.

scholarly journals Deposit insurance system as a guarantee of depositor’s protection

2021 ◽  
Vol 12 (1) ◽  
Author(s):  
Olena Sova ◽  
◽  
Nataliia Poliakova ◽  
Keyword(s):  
Financial Stability ◽  
Deposit Insurance ◽  
Banking System ◽  
Well Being ◽  
The State ◽  
Household Savings ◽  
Negative Effects ◽  
Guarantee System ◽  
European Standards ◽  
The Stability

The article examines the state and trends in the development of the deposit guarantee system for individuals in Ukraine. The challenges and needs of improving the mechanism of centralized insurance protection of depositors are identified. The authors emphasize the growing role of the Deposit Guarantee Fund of individuals in the banking market and expanding the scope of its modern mechanisms to reduce the negative effects of bank bankruptcy, which is an important factor in ensuring the stability of the banking system. Emphasis is placed on considering the disposable income of domestic households, as this indicator is an eloquent indicator of improving the country’s economic well-being. Parallels were made in the analysis of quantitative indicators of state social guarantees, namely: the expression of the living wage and the amount of the minimum wage for 2016-2020. The size of the household savings growing is estimated. The importance of converting household savings into investments for economic development is determined and the number of deposits and the value of deposits for households in 2016-2020 are analyzed. The authors also illustrate the dynamics of changes in the UIRD indicator. The deposit guarantee system is presented as an important factor in the financial stability of the state economy. The article emphasizes the successful steps of legislative regulation of the subject composition of the Deposit Guarantee Fund of Ukraine and reformation of compensation limits, which brings the domestic insurance field closer to European standards of depositor’s protection. According to the results of attracting deposits from the top-9 commercial banks of Ukraine, tables have been formed, the data in which allow making conclusions about the leaders of the deposit services market and the amount of potential reimbursement. Proposals have been formulated to improve the deposit guarantee system, aimed at optimizing insurance schemes and relations in accordance with the threats to financial security as an objective phenomenon of a market economy and the conditions of globalization.

Shadowy Banks and Financial Contagion during the Great Depression: A Retrospective on Friedman and Schwartz

2013 ◽  
Vol 103 (3) ◽  
pp. 73-78 ◽  
Author(s):  
Kris James Mitchener ◽  
Gary Richardson
Keyword(s):  
New York ◽  
Great Depression ◽  
Federal Reserve ◽  
Banking System ◽  
Financial Contagion ◽  
Bank Failures ◽  
Government Bonds ◽  
Real Effects ◽  
The Great Depression ◽  
Banking Panics

This essay assesses whether network linkages within the banking system amplified the real effects of bank failures during the Great Contraction. In 1929, nearly all interbank deposits held by Federal Reserve member banks belonged to “shadowy” nonmember banks which were outside the regulatory reach of federal regulators. Regional banking panics in the early 1930s drained these interbank deposits from central reserve city banks. Money-center banks in Chicago and New York responded to volatile and declining interbank deposits by changing their asset composition. They reduced their lending to businesses and individuals, and increased their holdings of cash and government bonds.

AN INTERVIEW WITH PAUL A. VOLCKER

2001 ◽  
Vol 5 (3) ◽  
pp. 434-460 ◽  
Author(s):  
PERRY MEHRLING
Keyword(s):  
New York ◽  
World War Ii ◽  
Great Depression ◽  
Public Service ◽  
Federal Reserve ◽  
World View ◽  
Banking System ◽  
World War ◽  
The Great Depression ◽  
Rebuilding Effort

Paul A. Volcker has spent most of his life in public service, at the Treasury under President Kennedy (1962–1965) and then as Undersecretary for Monetary Affairs under President Nixon (1969–1974), as President of the Federal Reserve Bank of New York (1975–1979), and finally as Chairman of the Board of Governors of the Federal Reserve System under both President Carter and President Reagan (1979–1987). Born in 1927, his world view was formed by childhood experience of the Great Depression and World War II, times of great national trial that led ultimately to recommitment and reconstruction. He went into public service in order to be a part of the rebuilding effort, but it was his fate instead to be involved mainly in managing pressures that would ultimately lead to the breakdown of the Bretton Woods system internationally and the Glass–Steagall banking system domestically. Consequently, there is some sadness today when he looks back on his career, but there is also a sense of accomplishment. In spite of everything, there was no depression and there was no world war. The possibility and hope for progress in years to come remains alive.The interview took place in Volcker's office at Rockefeller Center in New York City. His fourth-floor windows look out over the sunken plaza to the gold-leafed statue of Prometheus stealing fire from the gods, and then on farther to the elegant GE building, which is familiar to anyone who has visited New York. Over the front entrance it is just possible to see the inscription adapted from Isaiah 33:6, “Wisdom and Knowledge shall be the stability of thy times.” It strikes me as an appropriate inscription for the building, reminding one that this most beautiful complex was built in the years of the Great Depression. Today, with the forthcoming interview in mind, it reminds me also of the stakes involved in the conduct of monetary policy.

NPLs — The Solution Recipe for Albania

2015 ◽  
Vol 3 (1) ◽  
pp. 48
Author(s):  
Elona Shehu ◽  
Elona Meka
Keyword(s):  
Interest Rate ◽  
Negative Relationship ◽  
Banking System ◽  
Gdp Growth ◽  
System A ◽  
Analysis Technique ◽  
Recent Financial Crisis ◽  
The Stability ◽  
Asset Quality ◽  
Macroeconomic Determinants

The quality of the loan portfolio in Albanian banking system is facing many obstacles during the last decade. In this paper we look at possible determinants of assets quality. During the recent financial crisis commercial banks were confronted with deteriorating asset quality that threatened not only the banking industry, but also the stability of the entire financial system. This study aims to examine the correlation between non-performing loans and the macroeconomic determinants in Albania during the last decade. NPLs are considered to be of a high importance as they represent the high risk exposure of banking system. A solid bank with healthy assets increases the market efficiency. Our approach is based on a panel data regression analysis technique from 2005-2015. Within this methodology this study finds robust evidence on the existing relationship between lending interest rate, real GDP growth and NPLs. We expect to find a negative relationship between lending interest rate and asset quality. Further we assume an inverse relationship between GDP growth and non-performing loans, suggesting that NPLs decrease if the economy is growing. Furthermore this study proposes a solution platform, which looks deeper into the possibility of creating a secondary active market for troubled loans, restructuring the banking system or implementing the Podgorica model. This research paper opens a new lieu of discussion in terms of academic debates and decision-making policies.

Peter J. Montiel, Pierre-Richer Agenor, and Nadeem ul Haque. Informal Financial Markets in Developing Countries: A Macroeconomic Analysis. Published in the "Advances in Theoretical and Applied Economics" series edited by Homa Motamen-Scobie. Oxford: Blackwell. 1992. i-xi + 212 pp., including appendices. Hardbound. £40.00.

1993 ◽  
Vol 32 (3) ◽  
pp. 332-335
Author(s):  
Willem Van der Geest
Keyword(s):  
Developing Countries ◽  
Financial Markets ◽  
Foreign Exchange ◽  
Capital Mobility ◽  
Banking System ◽  
Exchange Rate Policy ◽  
Informal Markets ◽  
Financial Repression ◽  
Macroeconomic Analysis ◽  
Econometric Analyses

This volume reviews the nature and scope of informal financial markets in developing countries and elaborates on the theoretical and conceptual models which analyse 'financial repression' and other aspects of government intervention in financial markets. It also focuses on the consequences which the prevalence of informal financial markets in developing countries may have for monetary and exchange rate policy. In particular, it attempts to capture the functioning of informal, unregulated markets into macroeconomic models, working towards a general eqUilibrium model with informal financial markets. Two types of informal markets are analysed. The first are for informal lending at terms and conditions which differ greatly from those prevailing in the official banking system. The second are the 'parallel' markets for foreign exchange which tend to emerge in response to quantity restrictions on trade and administered allocation of foreign exchange to certain users at official rates, which are well below those on the parellel markets. The key question is whether these informal markets change the efficacy of monetary and credit policy-and, if they do, to what extent and in what direction? Two supporting appendices present econometric analyses of the efficiency of parallel currency markets and the degree of capital mobility in developing countries.

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