Explore The Construction Of Deposit Insurance System In Our Country

Deposit insurance system has been developed in 111 countries and regions worldwide, but it has not been established in our country because of moral hazard and adverse selection. As the development of economy, society and legal progress, especially the marketization of interest rate, deposit insurance system should be established in our country as soon as possible.The United States was the first country to establish this system in the world, nearly a hundred years of practice to make it perfect and also accumulated a wealth of experience; Korea was deeply influenced by Confucian culture in the history, and it has great similarities with China in the case of establishing this system.It will explain the necessity of establishing deposit insurance system in China through the research of deposit insurance systems in the Unite States and Korea, and also the economic globalization around the world. Firstly, financial market should connect with other financial markets in the world because of the economic globalization. Many countries have established deposit insurance system, for us, if we would like to follow the economic integration, the deposit insurance system should be constructed in China. Secondly, in the financial sector, the marketization of interest rate needs the establishment of a deposit insurance system. Self-regulation by market interest rate, along with increased financial risk, it will make the interests of depositors threatened after building the deposit insurance system. It will prevent banks and other financial institutions to do the harmful behavior to the depositors by the compensation of depositors from losses on behalf of the deposit insurance agency. Thirdly, promote the sufficient competition of small and medium-sized financial institutions. National credit makes the five big state-owned commercial banks to get the trust of the depositors, but for the small banks, because of a smaller scale, the imperfect system, they cannot match the overall strength of the big banks. After the establishment of the deposit insurance system, the deposits can be guaranteed in different levels. What’s more, depositors will not only treat the size of the bank as a selection criteria considerations, which can promote the establishment of small and medium-sized banks.Our country should establish the deposit insurance system, first of all, to step by step, gradually improve the system design:the gradual expansion of the coverage of the deposit insurance system. At the beginning of the progress, it may only include bank financial institutions, and then it can expand coverage to areas of insurance, securities and other sectors. The present case, the implementation of 300,000 insurance limit, as China’s economic development, it should improve timely. Secondly, we must refer to other country experiences, can be excellent localization initiatives in other countries’ reform:the development of the deposit insurance system in the United States, it is always followed by the law escort. For South Korea, more entry systems were borrowed from the United States, then adjusted according to their national conditions, these successful practices are worth learned. Also, to strengthen supervision of financial institutions, this is an effective measure to avoid the moral hazard of financial institutions. It has prompted banks and other financial institutions to implement prudent business strategy to avoid excessive risk investment and safeguard the interests of depositors. Finally, to gradually improve the system design details. At the beginning of construction of the system, the proposed implementation of "risk minimization" function mode,300,000 of insurance liability limits, the insurance cover banking financial institutions, the implementation of the security in the form of risk-based premium rate differences, forced to join in the development process. And then it should be adjusted according to specific circumstances.