The Research Of To-be-explicit Deposit Insurance System In China

The deposit insurance system rose after "the Great Depression" of1930s. And then with continuous large-scale bank failures happened in different countries, more and more countries have begun to protect depositors and maintain the stability of the financial system by emulating USA to install deposit insurance system. In fact, China has its own deposit insurance as an implicit system fully guaranteed by the Government, which is very different from the explicit deposit insurance in developed countries. Compared with explicit deposit insurance system imposed by the United States, Europe, although implicit deposit insurance system can effectively safeguard the stability of the financial system, but the price of the effectiveness is the surge in market moral hazard, fuzzy financial institutions exit mechanism.For this reason, China has been exploring the establishment of a deposit insurance system all the time. The timetable of central bank for20years shows: the study of deposit insurance system, which began in1993, made no substantial progress before the reform of state-owned banks’IPO, and encountered the obstacles of the2008financial crisis after the reform of stated-owned banks in2007. So even though the government actively promotes deposit insurance, the deposit insurance system failed to be launched duly in China. Therefore, this paper tries to analyze all aspects of the deposit insurance system in China with the above facts, and also intends to interpret the necessity of install explicit deposit insurance system. And with analysis of the results to further discuss how to more effectively promote the building of the deposit insurance system.This article is organized as follows:The first part is introduction, including the research background, research objectives, the main ideas and relevant literature review.The second part describes the situation and development of the deposit insurance system. At first, introduce the status of the foreign deposit insurance system. Then introduce the deposit insurance system in China, including proving the existence of our implicit deposit insurance system, explaining the reasons for the implementation of the implicit deposit insurance in long time, analyzing the cost of implementing deposit insurance system.The third part is the most important part of this paper, which mainly focus on the reform of the deposit insurance system in China. At first, based on the model of Gropp and Vesala under the point of view of the moral hazard, China can develop its own explicit deposit insurance system without increase in moral hazard. Then using the cost-benefit analysis on the state utility in institutional change theory, this paper analyzes the changes of China’s financial system. Finally, it comes to an analysis of the feasibility of deposit insurance system in China from the view of the status of China’s economic recovery after the crisis and China’s institutional environment.The fourth part proposes the design framework of explicit deposit insurance system in China.The last part, according to the full text content, presents the main conclusions of this paper, and three policy recommendations.