The Analysis On Establishment Of Deposit Insurance System In China From The Perspective Of Protecting Fair Competition In Bank Industry

With the development of the finance globalization nowadays,financial risk has became more contagious and harmful than before.Therefore it’s crucial to study on how to deal with financial crisis. As animportant part of financial safety network, the proper application ofdeposit insurance system (DIS) can stop single financial crisis fromspreading around and causing panic. Although the preparation ofestablishing DIS was started years ago by Central Bank, the related lawsand regulations have not been promulgated yet, we must bring up thenecessity of establishing the DIS again in the post-financial crisis era.One of the reasons why the DIS has been delayed is that thestate-owned banks refused to join the system because of their ownadvantages. This paper analyzed the necessity of establishing the DISfrom the prospective of protecting fair competition in banking industryand made some suggestions on the design of DIS. The objective of DIS isnot only to protect the depositors and maintain the financial stability, but also to create a financial market in which the small and medium bankscan compete fairly with the state-owned banks. And this will eventuallyimprove the competitiveness of China’s commercial banks. Only bystrengthen the competitiveness of banks can we prevent financial risk andprotect the depositors indeed. Therefore we also need to pay attention tothe measures on how to protect the fair competition in bank industrywhile design the structure of DIS.This paper is divided into four chapters. The first chapters toproceed from the basic theory, introduces the history, types, developmentof DIS. The second chapter is mainly to illustrate the monopolisticcompetition issues in banking sector and to draw a conclusion that theimplicit deposit insurance system has hindered the development of thebanking industry and had adverse effect on small and medium banks,which leads to a more serious effect on our country’s economy. The thirdchapter analyzed the necessity of building the DIS. First part analyzed thelegal value of DIS including value of orders, fairness and efficiency, thenthis paper discussed from the prospective of economy that DIS should beestablished due to the interior instability of banking sector and theeconomic situation at home and abroad. The forth chapter introduced theadvanced experience of DIS in America, Germany and made somesuggestions on the structure design of DIS in China, including theorganization and function of the DIS, the participants and the mode of insurance, the premium rate, the insurance coverage and coverage limits,improvement of related supporting measures and so on.