The effect of deposit insurance on the Canadian banking system

This paper empirically estimates the impact of the deposit insurance coverage changes on deposit levels and growth. The analysis is based on a Canadian dataset from a variety of sources. It covers quarterly data on deposits by province and by type of banking institution over the period of 1997-2011. During this period there were eight deposit insurance coverage changes. I employ a triple difference in difference estimation strategy to take advantage of changes in coverage levels between and within provinces. I find that in a year following a provincial regulator increases the deposit insurance coverage level to unlimited, credit unions in that province experience higher deposit levels than chartered banks in that province, and credit unions in provinces with lower deposit insurance coverage limits. I also find that during the 2008 financial crisis, credit unions in provinces with unlimited coverage had higher deposit levels.