Research On The Prevention Of Moral Hazard In The Operation Of Deposit Insurance System In China

The “Deposit Insurance Act” came into force in May 1st, 2015 which means China’s deposit insurance system established officially. AS an important system to maintain the safety of China’s financial security, deposit insurance system played a great a role in protecting depositor’s interests, regulating bankrupt financial institutions’ exit mechanism, promoting a fair competition between banks and maintaining the stability of the financial system to prevent the financial crisis.Deposit insurance combined the duality of bank and insurance, due to the unequal rights and obligations between the parties, and the information asymmetry, the deposit insurance system is easily to generate moral hazard. In the 1980 s and 1990 s, the phenomenon of widespread bank failures caused a huge impact to the financial market and a great recession in the United States due to moral hazard. When moral hazard out of control, it is difficult to assess the negative effects it may brought.It can be said that moral hazard is born in deposit insurance system, and it is unavoidable, however foreign developed countries achieved a lot in the prevention of deposit insurance moral hazard. So, as long as we take effective measures in the early period of the deposit insurance system, we can effectively reduce the probability of moral hazard.Therefore, in the early period of the implement of the deposit insurance system,in order to prevent the moral hazard of our deposit insurance system, it is very necessary to learn from the advanced deposit insurance system prevention.This article starts from how to define the deposit insurance system, explore the types of deposit insurance moral hazard and there generations and explicit the negative impact of moral hazard, reaffirm the importance of the prevention of the moral hazard of the deposit insurance system. And analysis of some foreign countries’ policies about moral hazard during the setup of their deposit insurance system, then combine them with China’s national condition and the contents of our deposit insurance system in order to contribute some suggestions about how to avoid deposit insurance system’s moral hazard from the design and external construct of the deposit insurance system.The first chapter mainly elaborates to the deposit insurance system and moral hazard profile, from the historical evolution of the deposit insurance system, states the history of world deposit insurance development, using property analysis come out a conclusion that deposit insurance is politic insurance and liability insurance. Then the article introduces the definition of moral hazard, display the forms of moral hazard from different subject of deposit insurance system.The second chapter mainly discusses the necessity of prevent deposit insurance moral hazard. Frist from the reason of the causes, analyzed that the reason that cause moral hazard is the internal feature of deposit insurance, it is unavoidable. Although it is impossible to avoid, if letting its continued expansion will weaken the market restraint mechanism, promote high hazard investment, and impact macro-economy’s efficiency. How to prevent moral hazard, increase its cost is important to stabilize financial system and promote the health development of the economy. So prevent moral hazard during the process of the operation the deposit insurance system is very important.The third chapter mainly analysis the measure and policy during the development of prevent moral hazard of deposit insurance system from Anglo American Law system countries such as the United States and Continental Lawsystem countries such as Japan. Draw on the enlightenment of how to prevent deposit insurance system’s moral hazard by combine their regulation practice and China’s national condition together.The fourth chapter is the conclusion of the whole paper. Because of the design of the deposit insurance system’s moral hazard in our country is already fully considered.But through carefully analyze the “Deposit Insurance Act” and combine some foreign significant measures, the author brings up an opinion about clear the standard rates and set the range of deposit insurance funds’ target reverse ratio. In addition, through other system design to prevent deposit insurance’s moral hazard.The last part is a summary of the full paper, which is the logical structure of the paper and the reaffirm of the conclusion.