A PROPOSAL FOR THE ESTABLISHMENT OF AN INTERNATIONAL DEPOSIT INSURANCE CORPORATION - No.133 - July 1979

Sep 21, 2026

Explores how multinational banking and the absence of host-country deposit insurance coverage for foreign banks’ local deposits can intensify liquidity crises and bank failures. Reviews existing domestic measures to reduce such risks, then develops deposit insurance as a mechanism for dealing with bank failures, including treatment of multinational bank deposits. Presents a proposal for creating an international deposit insurance corporation, outlines implementation problems, and concludes with summary and implications.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages36

Reading Time1 h 31 min

AccessFree to download

Introduction

Measures to Reduce Liquidity Crises and Bank Failures

Liquidity and Discount Facilities

Information about Debtors

Deposit Insurance as a Way to Deal with Bank Failures

National Deposit Insurance

The Treatment of Multinational Bank Deposits

Proposal for the Establishment of an International Deposit Insurance Corporation

Problems to Be Overcome

Some Institutional Features

Summary and Conclusions

References

A PROPOSAL FOR THE ESTABLISHMENTOF AN INTERNATIONAL DEPOSITINSURANCE CORPORATION HERBERT G.GRUBEJ INTERNATIONAL FINANCE SECTION DEPARTMENT OF ECONOMICS PRINCETON UNIVERSITY Princeton,New Jersey This is the one hundred and thirty-third number in theseries ESSAYS IN INTERNATIONAL FINANCE,published fromtime to time by the International Finance Section of theDepartment of Economics of Princeton University. The author,Herbert G.Grubel,is Professor of Economicsat Simon Fraser University in Vancouver.For the past year,he has been Visiting Professor of Economics at the Univer-sity of Nairobi in Kenya.A frequent contributor of booksand articles,his most recent publications have been a text-book,INTERNATIONAL ECONOMICS(1977),and several paperscritical of proposals for the establishment of a New Inter-national Economic Order.This is his second contribution tothe series ESSAYS IN INTERNATIONAL FINANCE. The Section sponsors the essays in this series but takesno further responsibility for the opinions expressed in them.The writers are free to develop their topics as they wish.Their ideas may or may not be shared by the editorial com-mittee of the Section or the members of the Department. rectorice SectionPRESENTED BY G.HELLEINER No.133,July 1979 A PROPOSAL FOR THE ESTABLISHMENTOF AN INTERNATIONAL DEPOSITINSURANCE CORPORATION HERBERT G.GRUBEL lds J.Baid ubia1TUNIVERSITBOROUGH,ONTARIO INTERNATIONAL FINANCE SECTION DEPARTMENT OF ECONOMICS PRINCETON UNIVERSITY Princeton,New Jersey 136,N0,15S INTERNATIONAL FINANCE SECTIONDepartment of EconomicsPrinceton University EDITORIAL STAFF Peter B.Kenen,DirectorEllen V.Seiler,Editor Susan M.Ciotti,Editorial AideKaeti Isaila,Subscriptions and Orders Library of Congress Cataloging in Publication Data Grubel,Herbert G A proposal for the establishment of an International Deposit Insurance Corpora-tion. (Essays in international finance;no.133 ISSN 0071-142X) Bibliography:p. 1.Insurance,Deposit. 2.Banks and banking—Government guaranty ofdeposits.3.Banks and banking,International. I.Title.II. Series:Princeton University.International Finance Section.Essays in international finance;no.133. HG136.P7 no.133 [HG1662.A3]332s[322.1'5]79-15458 Copyright ◎1979byInternational Finance Section,Department of Economics,Princeton Uni-versity. Allrights reserved.Except for brief quotations embodied in critical articles and reviews,no partof this publication may be reproduced in any form or by any means,including photocopy,with-out written permission fron the publisher. Printed in the United States of America by Princeton University Press at Princeton,New Jersey. International Standard Serial number:0071-142X Library of Congress Catalog Card Number:79-15458 CONTENTS INTRODUCTION 1 MEASURES TO REDUCE LIQUIDITY CRISESAND BANK FAILURES 2 Liquidity and Discount FacilitiesMeasures to Reduce Bank FailuresInformation about Debtors 4 5 10 DEPOSIT INSURANCE AS A WAY TO DEAL WITHBANK FAILURES 10 National Deposit Insurance10The Treatment of Multinational Bank Deposits11 PROPOSAL FOR THE ESTABLISHMENT OF AN INTERNATIONALDEPOSIT INSURANCE CORPORATION 14 Problems to Be OvercomeSome Institutional Features 15 16 18 SUMMARY AND CONCLUSIONS REFERENCES Digitized by the Internet Archivein 2019 with funding fromKahle/Austin Foundation https://archive.org/details/proposalforestab0000grub # Introduction During the last ten years,the major banks of Western countries have es-tablished large numbers of branches,agencies,and subsidiaries in othercountries,and the total amount of their deposits and loans has grown veryrapidly.This financial innovation,known as multinational banking,has at-tracted much attention from financial analysts,lawmakers,and economists.Ihave recently tried to explain theoretically the causes and welfare effects ofmultinational banking and the issues surrounding the U.S.InternationalBanking Act of 1978(Grubel,19

FAQs

Why does multinational banking create additional policy problems for deposit protection?

Deposits in local branches of foreign banks are often not covered by host countries’ deposit-insurance schemes, which creates gaps when liquidity pressures arise.

What measures does the essay review to reduce liquidity crises and bank failures?

It reviews existing policies for domestic banks, focusing on liquidity and discount facilities and related approaches tied to bank failure prevention.

What is the core proposal discussed in the essay?

The essay proposes establishing an international deposit insurance corporation, explains problems to be overcome, and describes some institutional features.

Sep 21, 2026

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