Study Of The Deposit Insurance System In China

Finance has a key role in modem 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 other countries and prepare to set up its DIS or improve established DIS. Having undergone the Asian financial crisis and the bankruptcy of several domestic financial institutions, China has now taken the establishment of DIS with Chinese characteristics as a major work in the course of financial reform and development.This article does lots of researches in further systematic analysis of DIS of China. Firstly, it thinks incoherent instability in banking, huge social cost after bank running or bankruptcy of financial institution, and central bank's limits to deal with bank running or bankruptcy. All factors above mentioned need DIS, which is the base of theory of DIS; Secondly, many DIS in different countries, such as America, Japan and Taiwan of China, are made systematic and further comparisons, then the author concludes that lots of basic items, such as objectives of DIS, qualification of insured institutions and how to be insured, coverage, assessment of premium, sources of deposit insurance fund and expenditure etc. constitute a DIS, and thinks that DIS can play a key role in preserving depositor's interests and maintaining the financial stability. However, DIS can possibly produce moral hazard and adverse selection; And then, the author expounds the necessity and feasibility of establishing China's DIS from financial system operation and risk situation at present in our country; Finally, on the study of DIS theory and practice in foreign countries, the author draws up the DIS pattern in accordance with China's status.