The Choosing Of Deposit Insurance System For China And Its Setting-up

The main purpose of the paper lies in analyzing to deposit insurance system (DIS) and the financial environment of China, and putting forward my own suggestion for the setting-up of DIS of our country. Particularly, that is to say from the function, the inherent basis, and the effect of DIS qualitatively and quantitatively, combining with the concrete characteristics of the financial environment of our country, and then put forward my own suggestion on the introducing of DIS for our country.The paper includes two major parts, which prove the Chinese suitability to DIS. one carries on research to the nature of DIS, the other carries on the discussion around the special current situation of China's financial system. Among them the analysis of the first part goes on from three respects, the content includes chapter one to chapter three. Chapter one is the introducing of DIS and its functions, which introduces the meaning and nature of DIS at first, then the functions it realized, especially its complementary functions with the financial supervisory system and the Last Lender's Resort (LLR), i.e. what it realized in maintaining the modern financial system safely as one of the three pillars of the modern financial safety net. That is, from the angle of an intact and effective safety net, DIS is indispensable to modem financial system.Chapter two is the inherent basis of DIS, which interprets why DIS is generally approved and adopted. A lot of scholars regard, it is because of the existence of bank runs that deposit insurance is produced; The author thinks, the existence of the problem of bank runs has just explained why deal with this problem, must not lead to the producing of DIS. In fact, as to the question of bank runs, there are a lot of counter-measures that the researchers have put forward and used in reality, and DIS is just one of them. Only being of an effective measure of run-ons, or being more effective than other measures, could the insurance be established as a kind of generally suitable system. So, as to the analysis on this question, the paper is not merely limited to explaining the question of run-ons, but lies in comparing the deposit insurance with other settlements, or the superiority of DIS over other policy recommendations, so asto prove the certainty that this system produces. For this reason, the paper has stated the functions or services of the modern bank at first, then through explaining the functions or services that the bank realize differently, draw different explanations to its defects, thus draw different policy recommendations of overcoming these defects (especially the problem of bank runs) (DIS is one of the important policy recommendations), and compared the superiority that DIS over other policy recommendations finally.Chapter three is the comparing of implicit DIS and explicit DIS. Seeing that what our country implements at present is an 100% implicit deposit insurance, introducing an explicit deposit insurance means giving up the existing system, and changing the current situation that the public is familiar with. That is weighing the advantages and disadvantages between the two kinds of different policies, and choosing out of them. So, on the basis of comparing the basic intension and the characteristic of these two kinds of systems, the paper analysed and compared the economic effect and macro effect of the two systems in our country emphatically. Analyses indicated that introducing an explicit DIS will economize a large number of fiscal expenditures of our country, which means better economic benefits; meanwhile, comparing to an implicit DIS, an explicit DIS is more effective in preventing the bank runs, protecting the medium and small depositors, creating a fair treatment and competitive environment for medium and small banks, and reducing moral hazards that the system bring, etc. The analysis has offered a stronger support for the introduction of explicit DIS of our country.The second part of the paper is chapter four. On the basis of the analysis of the first part, and combining with the special current situation of the financial system of our country, especially the characters of our finance safeguarding and handling in financial risks, etc. this chapter has proved the necessity that our country sets up an explicit DIS further, and analysed the actual goal of the forthcoming DIS and the coordinated reforms should be achieved when introducing it. Chapter four analysed the current situation of the commercial banks of our country first, one is the special statusof commercial bank in our financial system, the other is the particularity of its risks. Secondly it analysed the drawbacks in handling risks of our financial system, namely overly relying on the national credit, being excessively in virtue of the administration means and overdrawing the state finance. From the two respects, it proved the realistic significance of introducing an explicit DIS of our country. Afterwards, the paper discussed the goal of introducing an explicit DIS of our country, pointed out that the introduction of the system is neither to prevent bank runs nor to protect the medium and small depositor, but to protect the well-running banks from the irrational run-ons. Finally, before introducing this kind of system formally, we must carry on some coordinated reforms, such as creating a favorable system environment, setting up the discipline mechanism of the market and information announcing system, so as to offer a strong support for the effective operation of the system. The last chapter is the summary of the full text.