DEPOSITOR PREFERENCE LEGISLATION AND FAILED BANKS’ RESOLUTION COSTS
ISBN: 978-0-76231-073-9, eISBN: 978-1-84950-251-1
Publication date: 17 December 2003
Abstract
The Omnibus Budget Reconciliation Act of 1993 included depositor preference legislation intended to reduce Federal Deposit Insurance Corporation (FDIC) resolution costs. However, depositor preference might induce an offsetting reaction by general creditors and may affect resolution type.
We examine the empirical impact of state-level depositor preference laws on resolution type and costs with call-report data and FDIC data for all operating FDIC-BIF insured commercial banks that were closed or required FDIC financial assistance from January 1986 through December 1992. Our major findings are that depositor preference has: (1) tended to increase resolution costs; and (2) induced the FDIC to choose assisted mergers over liquidations.
Citation
Osterberg, W.P. and Thomson, J.B. (2003), "DEPOSITOR PREFERENCE LEGISLATION AND FAILED BANKS’ RESOLUTION COSTS", Research in Finance (Research in Finance, Vol. 20), Emerald Group Publishing Limited, Leeds, pp. 33-59. https://doi.org/10.1016/S0196-3821(03)20003-4
Publisher
:Emerald Group Publishing Limited
Copyright © 2003, Emerald Group Publishing Limited