1. Discussion by bent vale 2017 Biennial iadi research conference
Deposit insurance in times of crises: safe haven or regulatory arbitrage
Discussion by bent vale
2017 Biennial iadi research conference
Views and conclusions are the discussants’
and cannot be attributed to Norges Bank

2. Main content of the paper
How bilateral cross-border deposits are affected by existence and design of DI schemes.
Analyse thoroughly constructed data sets that have not been used so far.
Use a panel data model with bilateral cross border deposits as LHS variable and DI features as well as controls on the RHS.
Try to distinguish between safe haven and regulatory arbitrage.

3. Main content of the paper
Findings
In general: existence of DI, DI coverage, power of DI scheme and DI moral hazard mitigation contribute positively to bilateral cross border deposits.
Both in Safe Haven model and Regulatory Arbitrage model.
During crisis in depositor home country:
Safe Haven model gives similar results as in stable times.
Regulatory Arbitrage model gives less similar results.
Paper concludes: in crisis DI primarily creates Safe Havens, to a less degree is there Regulatory Arbitrage.

4. Main comment The title of the paper:
Safe Haven or Regulatory Arbitrage
Does a distinction between Safe Haven (SH) and Regulatory Arbitrage (RA) make sense?

5. Paper’s distinction between SH and RA
Main comment
Paper’s distinction between SH and RA
Safe Haven:
Depositor in country A when deciding how much to deposit in country B and C, only considers DI features of B and C, but not A.
Regulatory Arbitrage:
Depositor in country A when deciding how much to deposit in country B and C, considers DI features of B and C relative to A.
Why this distinction?
Depositors should obviously consider DI in their own country when deciding on cross border deposits.
Hence, RA model is the relevant one.

6. Paper’s distinction between SH and RA, recommendation
Main comment
Paper’s distinction between SH and RA, recommendation
Drop the SH model and focus on RA model, i.e. Model 2
Skip the attempt at distinguishing between Safe Haven and Regulatory Arbitrage.

7. Other comments DI power to intervene: Moral hazard mitigation:
More important to uninsured depositors
But Supervisory Authority’s power and competence should matter at least as much as DI’s power.
Moral hazard mitigation:
MH an individual bank phenomenon
Risk based or flat fee matters more than collective bank funding or collective tax payer funding of DI.

8. Conclusion
An interesting paper, showing how DI design matters for depositors.
Nice combination of data
But, labelling models as Safe Haven or Regulatory Arbitrage should be dropped.