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Deposit Insurance and Depositor Behavior: Evidence from Colombia

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  • Nicolás de Roux
  • Nicola Limodio

Abstract

We exploit a large and unexpected increase in the Colombian insurance threshold to investigate how depositors respond to higher deposit insurance. Monthly depositor-level records from a major bank show that the level and growth rate of deposits rise with higher coverage. Individuals who were fully and nearly-fully insured before the policy drive this increment. A survey of bank customers indicates that higher deposits were replenished by lowering cash and other assets. We estimate an elasticity of deposit growth to deposit insurance of 0.4%, and fi nd a similar fi gure in the United States by leveraging the 2008 increase in deposit insurance.

Suggested Citation

  • Nicolás de Roux & Nicola Limodio, 2021. "Deposit Insurance and Depositor Behavior: Evidence from Colombia," Documentos CEDE 18800, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:018800
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    Cited by:

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    2. Quintero-V, Juan C., 2023. "Deposit insurance and market discipline," Journal of Financial Stability, Elsevier, vol. 64(C).
    3. van der Kwaak, Christiaan & Madeira, João & Palma, Nuno, 2023. "The long-run effects of risk: an equilibrium approach," European Economic Review, Elsevier, vol. 153(C).
    4. Nicola Limodio & Francesco Strobbe, 2023. "Liquidity Requirements, Bank Deposits and Financial Development," Economica, London School of Economics and Political Science, vol. 90(357), pages 240-270, January.

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    More about this item

    Keywords

    Banking; Financial Regulation; Household Saving.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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