We propose the establishment of a deposit-insurance scheme that would be implemented by the issuance of put options on bank deposits by the central bank. The proposed scheme would prevent contagion-driven bank runs and, at the same time, put the right incentives in place (for both bankers and depositors) to dwindle away the moral hazard problem that pervades typical deposit insurance arrangements.

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This paper shows how uncertainty about liquidity demand can lead to a high degree of dollarization in the banking system. I study a model where banks choose a portfolio composed of local currency, dollars, and real loans. Compared to the anticipated transactions demand for each currency, I show that the bank will hold a relative large amount of dollars and a relatively small amount of local currency.

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Using bank-level data, this paper address the question of whether the banking sector was resilient or not to systemic shocks during the crisis periods in Latin America and East Asia during the nineties by testing if systemic shocks pushed mainly the weakest banks, defined in terms of their fundamentals, to fail in both regions before the onset of the crisis rather than provoking failures due to a persistent decline in bank-level fundamentals during the crises periods.

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This paper studies whether countries that rely mainly on banks face more costly crises than countries where bond markets are larger. The results suggest that bank-based financial systems are associated with slightly more costly crises, while the link between bond markets and crisis costs is fragile. More importantly, financial systems with a stronger reliance on bond markets are associated with higher output growth, regardless of the presence of crises.

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