Research On Deposit Insurance Pricing Of Commercial Banks In China

The 2008 financial crisis had had a tremendous impact on the global economy,especially to the financial industry. During the management process of the financial crisis, the United States and major European countries have established relatively completed deposit insurance system, and resolved the large scale bank runs due to the financial crisis and recession.Countries have begun to attach importance to the deposit insurance system after the crisis. This made our country started to focus on the deposit insurance system again,besides, provided referential international experience for establish China's deposit insurance system. The Prime Minister Li Keqiang signed the “Deposit Insurance Act”on February 17, 2015, and the act was formally implemented on the May 1, 2015.The implementation of the act was another landmark event of China's interest rate liberalization reform, made China the number 114 country and region which established the deposit insurance system. Till now, countries had a lot of successful experience and lessons of failure of the deposit insurance system, the core of the system is the deposit insurance premium standard, to enable ability to effectively maintain the financial system stability, reduce the moral hazard and adverse selection problems caused by the unreasonable deposit insurance premium.This paper firstly conduced and summarized the main experience of the development of the global insurance deposit system, and systematically analyzed the major deposit insurance pricing model, the option pricing model and the expected loss pricing model, then compare and analyze the advantages and disadvantages of the different models.The simulation calculation of China's deposit insurance was based on the major 13 listed banks past five years actual data, use FDIC model and RV model to test the deposit insurance premium, and compare the simulation result of the two models.For the RV model, exam the deposit insurance premium level under regulatory tolerance circumstance and exclude the regulatory tolerance circumstance, and the conclusion is: The 13 listed banks are all grade 1 of the supervision rating system,thus, the rate of the deposit insurance premium are all at the lowest level of the FDIC,which is between the five ten-thousandths and nine ten-thousandths; The RV model showed that the rate is between the highest(nine ten-thousandths) and the lowest(five ten-thousandths) of the FDIC, the rates of the different banks have higher discrimination level. Finally, conclude the deposit insurance system's impact onChina's banking industry, and provided three recommendations of the implementation of the discrimination deposit insurance premium rates.