Banking Crises, Bail-ins and Money Holdings
Series
Central Bank of Cyprus Working Papers
Type
working paper
Author(s)
Abstract
We study changes in deposit and cash holdings by households following the 2013 banking crisis in Cyprus. During this crisis the two largest banks in the country were resolved involving a bail-in of uninsured depositors and debt holders. Our analysis is based on anonymized survey data covering households with differential exposures to the resolved banks: uninsured deposits, subordinated debt and equity holdings. In line with the portfolio theory of money demand, we find that in the intermediate aftermath of the crisis households significantly reduced their holding of bank deposits and increased their cash holdings. This flight to cash was much stronger for clients which experienced a bail-in of deposits or subordinated debt than for households which held equity in the resolved banks or did not suffer any financial loss. In the medium term, however, we find no difference in depositor confidence or intended money holdings between households which suffered a bail-in and those which did not.
Language
English
Keywords
Financial crises
bank resolution
bail-in
deposits
cash
money demand
HSG Classification
contribution to scientific community
Number
2017/2
Pages
58
Eprints ID
254920
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Name
Brown-Banking_Crises,_Bail-ins_and_Money_Holdings.pdf
Size
2.72 MB
Format
Adobe PDF
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