Download (Paper3) Presentation by Jean Roy

Discussion of
«Deposit Insurance in Times of Crises:
Safe Heaven or Regulatory Arbitrage»
Jean Roy, HEC-Montreal
Content
1. Strengths
2. Questions
3. Conclusion
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1. Strengths
• A relevant research topic: cross-border deposits
• Excellent knowledge of the literature
• Very extensive data base in terms of the numbers of
countries, number of variables and number of years.
• Sophisticated econometric work: unbalanced panel
data, sensitivity analysis of the impact of various
design characteristics of DI, various robustness
checks.
• Interesting results on the behavior of depositors
• Written in a very clear and concise style
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2. Questions on the sample
• P.9 «Our sample covers 22 bank countries11 and 131
depositor countries from 1998 to 2011 but not all
bilateral cross border deposits Xijt are available for all
years.»
• What were the criteria to select a country as a bank
country?
• Are these countries included or not in the depositor
group? If not, why not?
• Why is Canada not included in the bank countries group,
while Australia is?
• Why is Macau in the bank countries group while most
major Asian financial centers are not?
• What are the 131 depositor countries?
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2. Questions on the data
Figure 1 and 2 show the distribution of cross-border
deposits over time and across bank countries, still there are
some questions:
• What is the market share of the 4 most important bank
countries (UK, Germany, Switzerland and United States)?
• What is the distribution of cross-border deposits across
depositor countries?
• Is there concentration with regards to depositor
countries?
• Are there outliers, which could affect the results?
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2. Question on the methodology
As the DI variables do not seem very correlated,
as shown in Table A9, why is there no regression
where they would all be included at the same time?
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2. Questions on the results T1
• To what extent is the gravity model important in this
research?
• How to explain the peculiar pattern of adjusted Rsquared?
Gravity models: .553 and .583
All other models: .946 to .952
• What part of the variance is explained by the DI variables,
the control variables and the fixed effects variables?
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2. Questions on the results T1-T2, T3-T4
• Tables 2 and 4 differ from Table 1 and 3 respectively by
the fact that variable Dit is replaced by variable Dijt,
which should provide different information.
• However, we observe that the adjusted R-squared of
Table 1 and 2 and Table 3 and 4 are essentially the
same.
• This begs the question: Are the information sets
provided by the explanatory variables in Table 1 and 2
and Table 3 and 4 really different?
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Adjusted R-squared from T1, T2, T3, T4
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2. Questions on the results T5
• The results of Table 5 show that emergency actions
(increases in insured deposits protection) during a
crisis do increase cross border deposits.
• Is there an endogeneity issue? Could emergency
mesures be inluenced by the behavior of cross-border
deposits?
• What are the costs and benefits for the DI of the bank
country of increased cross-border deposits?
• The influx of foreign deposits may help the home
banks, but if these fail the exposure of the DI will be
greater.
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2. Questions for further research
• What would be the performance of the model out of
sample, ie as a predictive model?
• Generally, what are the effects of cross-border
deposits on deposit insurers?
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2. Questions on the conclusion
Last sentence of the conclusion p.19 :
«Likewise, our findings, documenting a novel pattern of save
(sic) haven and regulatory arbitrage driven behavior by
depositors, also stress the need for a coordinated regulatory
strategy with respect to deposit insurance schemes».
• What are the hidden assumptions to go from a descriptive
study to a normative recommendation?
• Are cross-border deposits «bad» and to be avoided?
• Are they not the realization of depositor discipline on
banks and deposit insurers?
• Is not regulatory competition also a good thing?
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3. Conclusion
• Cross-borders deposits are a very interesting and
relevant topic for deposit insurers.
• The paper represents a considerable amount of work
which must be acknowledged.
• Still some questions arise both with regard to the
methodology and with regard to the implications of the
results for policy.
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