Research On The Impact Of Deposit Insurance System On Bank Risk-Taking

Before the establishment of China’s deposit insurance system,banks and other financial institutions actually had implicit government guarantees,and when banks failed,the government would provide interest protection for depositors.This kind of implicit guarantee is not conducive to the formation of a market mechanism for fair competition,and is not in harmony with the reform and development requirements of financial marketization.In May 2015,China officially implemented the Deposit Insurance Regulations,and since then,implicit guarantees have moved toward explicit guarantees,the competitive environment of various types of banks has become more fair,and the rights and interests of depositors have been protected by market mechanisms,which is conducive to timely response to financial risks and stabilization of financial order.However,due to the fact that deposit insurance is a depositor’s interest protection and bank responsibility transfer system,moral hazard and adverse selection that are easy to occur under the condition of information asymmetry will also exist in the deposit insurance market,and even increase,such as the weakening of the willingness of savers to supervise and the improvement of bank risk appetite.However,the deposit insurance system will continue to improve through market practice to minimize the negative effects of the system.So,has the implementation of China’s banking deposit insurance system significantly affected the risk assumption of China’s commercial banks since 2015? This requires an empirical analysis of the implementation effect of the deposit insurance system,to provide a reference for how to further improve the deposit insurance system,this paper hopes to explore the impact mechanism of the deposit insurance system on the risk assumption of China’s commercial banks from the perspective of bank heterogeneity,so as to facilitate the enlightenment and suggestions obtained more targeted.The fixed-effect model of this paper empirically examines the data of 241 commercial banks in China from 2008 to 2020,and analyzes the impact of the deposit insurance system on the risk assumption of commercial banks in China.The results show that the implementation of the deposit insurance system has led to an increase in the risk assumption of banks in China.On the one hand,the deposit insurance system reduces the sensitivity of the masses to bank risks,weakens market constraints,and improves bank risk bearing;on the other hand,after the establishment of the explicit deposit insurance system,the value of bank concessions declines,the self-restraint of banks weakens,and the risk-taking behavior increases.Heterogeneity analysis shows that:(1)the introduction of the deposit insurance system significantly improves the risk commitment of urban and rural commercial banks,but the effect is not obvious in other banks;(2)the implementation of the deposit insurance system significantly improves the risk commitment of small banks,while the effect of other banks is relatively less obvious;(3)in banks with strong government background,risk assumption is relatively sensitive to the implementation of the deposit insurance system;(4)the deposit insurance system significantly improves the risk commitment of unlisted banks,and the information disclosure of listed banks is relatively perfect.With more external oversight,moral hazard is easily overcome.According to the conclusion,this paper puts forward the following suggestions:First,the deposit insurance system should improve the differential rate mechanism and use the cost of insurance to restrain the bank’s bank risk-taking behavior.Secondly,deposit insurance institutions implement differential supervision of different banks,formulate different risk indicator warning lines,and prevent risks in a timely manner.Finally,the deposit insurance system should give the deposit insurance institutions more regulatory authority to make up for the lack of market constraints.