Theoretical Analysis Of The Deposit Insurance System And The Mode Select

The deposit insurance system, the supervision of financial supervises authorities and the last depositors of central bank are considered as the three base factors of the Financial Security Net. When it is difficult for banks which participated in the deposit insurance to turnover capital there will be default risk and bankruptcy, those banks may acquire capital assistance or capital compensation from insurance institutions according to the insurance contracts. However, China lacks of the obvious deposit insurance system nowadays.To establish the suitable deposit insurance system in China has become one of the national strategies in order to improve our financial system. In Jul.13, 2004, in the fifth BFA, Zhou Xiao chuan, the president of the central bank of China, made a speech,"We have to establish the mechanism which washes out those financial institutions with bad performance. In China, the deposit insurance system is the next thing to be considered. It is also the balance between finance stable and moral risk"This paper discussed the theoricial analysis and the choice in mode of deposit insurance system. There are 4 chapters. Chapter 1 is the introduction, which discusses the synthetic description of literature on deposit insurance system and points out how to establish the system is the key issue. Chapter 2 discusses the theoritical analysis of deposit insurance system, based on current bank and epidemic bank crisis theory, the function of deposit insurance system, and the analysis of the negatives of deposit insurance system. Chapter 3 is the comparison of different deposit insurance system. In this chapter, I introduced the basic framework of deposit insurance system, especially the deposit insurance system in the U.S. The main reason is that the U.S is the first country which established deposit insurance system that can be considered to be the guide. And I also introduces some deposit insurance system in Europe at the end of this chapter. In chapter 4, I discusses that which deposit insurance system is suitable for China. It includes the establishing of institutions, the function, the principle of insurance, the source of fund, the fee rate, and the management of fund and how to compensate. Furthermore, I discusses the way of how to macro control and how to solve the problems of lacking of supervision for central bank. It is also the creation of this paper.I wish this paper is meaningful to establish the deposit insurance system in China.