Regulatory framework and deposit – investment guarantee fund in Greece

Author:SPYRIDON REPOUSIS
Position:UNIVERSITY OF PELOPONNESE
Pages:18-30
SUMMARY

Purpose - The purpose of this paper is to examine the current regulatory framework of Greek Deposit and Investment Guarantee Fund, trying to show solutions for strengthening it. Design/methodology/approach - This paper aims to investigate the deposit and investment guarantee fund in Greece by identifying new problems and developing solutions. Findings - The main finding is that the deposit and investment guarantee fund contributes to the stability of the... (see full summary)

 
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Regulatory framework and
deposit – investment guarantee
fund in Greece
Spyridon Repousis
University of Peloponnese, Patras, Greece
Abstract
Purpose – The purpose of this paper is to examine the current regulatory framework of Greek Deposit
and Investment Guarantee Fund, trying to show solutions for strengthening it.
Design/methodology/approach This paper aims to investigate the deposit and investment
guarantee fund in Greece by identifying new problems and developing solutions.
Findings – The main nding is that the deposit and investment guarantee fund contributes to the
stability of the Greek banking sector and also offers practical solutions to strengthen it. Greek Deposit
and Investment Guarantee Fund has an important feature, which is the speed of a decision about a bank
failure resolution (in ve working days), but needs immediately strengthening and increasing its funds
to cope with the resolution of non-viable banks and undertaking for costs. There should be an
appropriate ratio between the size of total assets (especially cash and cash equivalents) of Greek Deposit
and Investment Guarantee Fund and the amount of total guaranteed deposits, which is now below 2 per
cent. Regulatory framework needs revising and fees must be increased if its funds fall below a certain
level of coverage of guaranteed deposits. Also, a guarantee premium, not only a at rate premium,
should be implemented for all banks. An additional risk-adjusted premium varying according to Greek
banks’ risks of their portfolios would be better to increase funds of deposit guarantee fund and reduce
moral hazard of bank manager by increasing costs. They must ensure an adequate diversication of
re-deposits of Greek Deposit and Investment Guarantee Fund funds and must limit and avoid a conict
of interest of its board membership for individuals who are actively involved in Greek commercial
banks by implementing framework and rules about it. Also, as a consequence of obeying the regulatory
framework, it is necessary to include as board members of Greek Deposit and Investment Guarantee
Fund only those banks that are subject to strong prudential supervision and regulation.
Practical implications – As a result of research, changes are necessary to immediately be made to
cope with current nancial crises and problems of Greek banking sector.
Originality/value – The originality of this paper is that it is the rst description of the Greek Deposit
and Investment Guarantee Fund and its results are important for economists, politicians and
international community, who evaluate the regulatory framework of Greek Deposit and Investment
Guarantee Fund, especially at the current time when the Greek economy and the Greek banking sector
are in a very weak scal position.
Keywords Greece, Banks, Deposit insurance schemes, Regulatory framework
Paper type Research paper
1. Introduction and overview of Greek Banking System
Many developed countries have had signicant banking crisis and bank failures during
the past 30 years. Central bankers feared widespread bank failures because they
exacerbated cyclical recessions and may triggered a nancial crisis. In addressing
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1358-1988.htm
JFRC
23,1
18
Journalof Financial Regulation
andCompliance
Vol.23 No. 1, 2015
pp.18-30
©Emerald Group Publishing Limited
1358-1988
DOI 10.1108/JFRC-07-2013-0023

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