The Impact Of Deposit Insurance System On The Moral Hazard Of Commercial Banks

With the market-oriented reform of interest rate in China entering the final critical period,China's economy is in the special stage of "three stages overlap",and the non-performing loan rate of banks is on the rise under the China's financing system dominated by indirect financing.In 2015,China formally launched the deposit insurance system to ensure the smooth progress of China's economic reform and development As one of the three pillars of the financial safety net,deposit and insurance system integrates pre-prevention and post-treatment.It plays an irreplaceable role in protecting depositors'interests,enhancing financial risk resistance and disposal ability,and promoting the development of private banks.It may also lead to the derivation of moral hazard.That is to say,on the one hand,banks are more inclined to engage in high-risk business to achieve the goal of maximizing profits under the credit and guarantee of deposit and insurance system,while improving their profitability in the short term,accumulating medium and long-term individual and systemic financial risks;on the other hand,since depositors enjoy deposit protection,they only pay attention to the deposit interest rate,which increases the cost of banks'liabilities,forcing banks to engage in higher-risk asset business.Therefore,from the perspective of moral hazard,this paper studies the impact of deposit insurance system on the moral hazard of commercial banks,which will help to avoid moral hazard,improve the financial stability of deposit insurance system,and further improve and strengthen the construction of China's financial safety net.On the basis of existing research,this paper defines,classifies and measures moral hazard,divides moral hazard into pre-moral hazard(measurement index:leverage ratio,non-interest income ratio and reserve coverage ratio)and post-moral hazard(measurement index:Z value);then,from the bank and depositor level,it analyses the generation of moral hazard in banks;finally,this paper empirically studies the impact of deposit insurance system on the moral hazard of commercial banks by using the micro-data of 96 domestic commercial banks from 2013 to 2017.The results show that:firstly,after the implementation of deposit and insurance system,both the pre-moral hazard and post-moral hazard have increased significantly.Secondly,from the views of pre-moral hazard,the deposit insurance system has increased the risk of balance-sheet business and the fluctuation of off-balance-sheet income,and reduced the reserve coverage.On the one hand,banks increase moral hazard through excessive expansion of asset business and high-risk off-balance-sheet business;on the other hand,banks increase the problem of information asymmetry by manipulating profits and optimizing capital adequacy ratio through less provision.Thirdly,from the aspect of post-moral hazard,the deposit insurance system has significantly increased the bankruptcy risk of banks,it indicates that banks may excessive rely on deposit insurance system,and accumulate medium and long-term individual risks.Since the deposit insurance will provide financial assistance or deposit compensation to the problem institutions,so banks may lack the sense of stopping losses in time when they encounter problems,and attempt to reverse the situation by seeking profits,it may further worsen the operational crisis.Combining with the empirical results,and collating the experience of foreign deposit insurance system,this paper puts forward the following three suggestions:first,establish the bank risk rating system,improve the risk differential rate system.Second,the deposit insurance institution should be given certain disposal and supervision powers,and introduces timely correction system.Third,improve the information disclosure system and increase transparency.