Abstract
Abstract. The basic function of all deposit insurance schemes is to pay deposit insurance payouts to depositors promptly for the losses they otherwise would suffer in the event of an insured financial institution’s closure. As a result, depositors are relieved of both the recovery-rate and time risks of a liquidation process up to the insured level of their deposits. Deposit insurance payouts – including the speed and convenience – vary across countries and can affect public confidence in the deposit insurance scheme. Information technology support in the payout process is essential. However, one of the major problems in the insurance payout process is the lack of the proper information technology. This paper addresses the factors related to the payout process, discusses the advantages and disadvantages of various approaches, and makes recommendations on the establishment of a universal information technology model for a deposit insurer to accomplish the procedures of insurance payouts.Key words: deposit insurance, deposit insurance payouts, information technology support
Highlights
Activities of credit institutions are related to many factors that make up the operational risk of these institutions
In order to protect the interests of depositors and to give the public a formal mechanism how to behave in a case of insolvency of credit institutions, many countries in the world have created the deposit insurance schemes, the principal purpose of such schemes being to protect depositors from large losses (e.g., Parker, 2010)
That is why we propose the universal information technology model for deposit insurance payouts, which can be adapted in many deposit insurance schemes
Summary
Activities of credit institutions are related to many factors that make up the operational risk of these institutions. The European Commission initiative in 2002 has established the European Forum of Deposit Insurers (EFDI) which brings together 57 deposit insurance institutions from 46 European countries (European Forum of Deposit Insurers, 2014) Both the IADI and the EFDI goals are to contribute to the financial market stability, promoting the world of the Deposit Insurers cooperation in sharing experiences, exchanging the latest information, discussions on topical issues in the field of deposit insurance, organizing and encouraging members of the debate, the exchange of relevant information and experience. Unlike the IADI, the EFDI works on the development of the EU directives and their transposition into national laws and proposals for the practical implementation of the directives’ provisions These organizations pay a particular attention to the deposit insurers to guide their activities, offering best practice provisions. It must be recognized that the standardization and unification of insurance payout procedures are neglected by the IADI and the EFDI, and the information technology processes have to be chosen by a deposit insurance scheme itself (FDIC, 2010)
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