The Negative Effects Of Deposit Insurance System Analysis And Countermeasures

With the rapid development of China's economy and its opening to the world, the financial security problem of our country is becoming more and more serious in these days. Deposit insurance, as one of the three main tools for the security net of a country's financial system, is playing a vital role in and around the world. The commercial bank system is a weak point in Chinese financial system, especially during the finance reforming progress. How to prevent the commercial bank system from going into liquidation and to protect the depositors from getting lost are of great importance to China's economy. Using the experience of developed countries as reference and combining the real situation in Chinese commercial bank system, it is very meaningful to establish deposit insurance in commercial bank system. On the one hand, it will be of great use for the risks of commercial bank system, on the other hand, it will be the first step for the whole country's deposit insurance system.However, we can find out there are many negative effects in deposit insurance system through other countries' financial experiences. Moral hazard and adverse selection is the two main shortcomings in deposit insurance system. Because of the two reasons , deposit insurance system induce all kinds of risks to accumulate. For example , depositors may be unconcerned about which bank to select, and commercial bank should take a risk. At the same time the set-up of deposit insurance system always lead to adding social cost and commercial bank's cost in operating, etc.Now China sets about setting up Chinese deposit insurance system to change implicit insurance system. Absolutely, these negative effect would appear in Chinese deposit insurance system, so the thesis penetrates with these effects in analysing and seeking for countermeasure. Through these analyses the author hopes to give some illumination to Chinese deposit insurance that is setting up .