Study Of The Deposit Insurance System

Deposit insurance system is the system that requires banking institution to pay premium for insurance agency in accordance with the absorption of a certain ratio of deposits to the insurance agency insured. When the depositors run on a bank, deposit insurance agency will pay directly to depositors of some or all of deposits in order to avoid financial institutions crisis.Deposit insurance system was formally established in the United States. In 1933 the U.S. Congress passed the Glass Act to cope with the financial crisis. The system has played a great role in the effective protection of the interests of depositors. American economist Friedman also says the federal insurance system is very useful. Deposit insurance system also can promote fair competition among banks, the money supply and contribute to the stability of financial management functions. Therefore, from the 1960s, many countries in the world have set up their special deposit insurance system.Deposit insurance system has played a significant role in practice, while in theory, it also has sufficient basis. From the standpoint of legal theory, the deposit insurance system maintains the social stability and justice; from the economics perspective, the deposit insurance system would eliminate negative impact of the banks operating volatility. However, we also recognize that the deposit insurance system is not a panacea. It's a certain errors may increase the risk of moral hazard, increase bank operating costs, and because of the government's special protection, the system may also be difficult for large banks to serve its purpose.The contents of the deposit insurance system mainly includes that the target of the insurance system, the deposit insurance agency, deposit rate of premium and so on. Content of the foreign deposit insurance system is very different, mainly by economic fundamentals, cultural backgrounds and historical factors. Deposit insurance system was formally established in the United States. On the rate of premium, the U.S. adopted risk-adjusted premiums. The deposit insurance system of the EU is the model of the international cooperation. Germany practice is the private insurance system that...