Research On Deposit Insurance Systems

Finance has a key role in modern market economy, its stability is very important to economic development, security and sovereignty of a country. With the rapid process of deregulation and globalization, many banking and money crisis occurred in recent two decades, which urged lots of governments to study deposit insurance systems (DIS) in foreign countries and prepared to set up its DIS or improve established DIS. Many expert and scholars did deep researches on moral hazard and adverse selection, proposed some solution to them.We haven't set up our deposit insurance system so far. There is a little research on DIS in our country. The published papers in China mainly did some introduction of DIS and did less on background of establishment of DIS, experiences and lessons of DIS, effects and systematic comparisons on DIS in foreign countries.In this dissertation paper, the author did lots of researches on theoretical systematic analysis of DIS, compared different DIS in many developed countries such as U. S., Canada, European countries, Japan etc. and some developing countries such India. After that, combined with practical situation of China, made many proofs that China should set up its own deposit insurance system which has both supervision to insured financial institutions and compensate for depositors. For this purpose, he proposed some detail design of this kind of DIS, and got many conclusions which make sense in theoretical of DIS researches and guidance in setting up our country's deposit insurance system.Firstly, the author used the Public Theory, The New Institutional Economics as a tool to do systemic theoretical researches on DIS. He thought incoherent instability in banking, asymmetric Information between banks and depositors, huge social cost after bank runs or bankruptcy of financial institution, and central bank's limits to deal with bank runs or bankruptcy, all factors above mentioned need deposit insurance system, which is base of theory of DIS. Lots of items such as objectives of DIS, sources of deposit insurance fund and expenditure, coverage, assessment of premium, qualification of insured institutions and how to be insured etc. constitute a deposit insurance system. In the meantime, DIS was first explained by using The New Institutional Economics.Secondly, chapter 3 and chapter 4 discussed background of setting up Federal Deposit Insurance System, its operation environment, mechanism and positive and negative roles etc. Many DIS including other countries' DIS such as Canada, Italy, French, British, Japan and India were made a systematic and further comparisons. According to DIS' different characteristics in different countries, detail classification of DIS was made. The author thinks that DIS which has nearly 70 years old history so far plays key role in protect depositand improve stability of finance system, and has been an important financial supervision tool and part of financial system in many countries. However, DIS isn't everything, it just can reduce or keep non-systematic financial risk away.In chapter 5 for the purpose of further researches on Moral Hazard resulting from DIS, some returns or utility functions of bank, depositors and institution managing for DIS were put up, the author used Game Theory to analyze that in what situation the moral hazard was produced. In term of financial system operation and risk situation at present in our countries, necessity and feasibility of setting up deposit insurance system in our country. The author thinks that establishment of DIS that has supervision and compensation functions, deposit partly insured can't increase moral hazard in our country.Finally, detail design of DIS in China was made. By means of Information Economics Theory and Cluster Analysis, Adverse Selection was discussed deeply. In order to reduce or avert adverse selection, the insured institutions were arranged as different risk level, high-risk level with high premium and low-risk level with low premium. By means of Econometrics and computer, some econometric model...