Deposit Insurance Corporation Research Articles

New US deposit insurance rules for trust accounts take effect

Abstract On 1 April 2024, new requirements for US bank deposit insurance coverage for trust accounts took effect. These requirements apply to insured depository institutions, which include the over 4,500 US banks and similar organizations that are chartered under US law and hold deposits that are insured by the Federal Deposit Insurance Corporation. The new requirements apply retroactively to existing trust accounts, and some individuals may be entitled to more or less deposit insurance coverage than under existing requirements. Further, US-based banks that offer certificates of deposit (CDs), including structured CDs, to investors should be aware of how the new requirements affect their trust account clients’ deposit insurance and investment strategies and should update their program disclosures accordingly.

Perbandingan Bentuk Kelembagaan Program Penjaminan Polis Asuransi Antara Indonesia dengan United Kingdom dan Jepang

Insurance company defaults in Indonesia have a negative impact on policyholders. Suing the company for bankruptcy is the last resort for policyholders to obtain compensation from the company's assets, but the enforcement of court judgements is difficult due to obstacles such as abuse of receivership powers. Policyholders' rights are often violated as they do not receive insurance claim payments. Law No. 40 of 2014 requires insurance companies to participate in the Policy Guarantee Programme and establish a Policy Guarantee Agency within two years. However, such an institution has not yet been established in Indonesia. This research compares the Policy Guarantee Programmes in the UK and Japan to show the importance of establishing a similar institution to protect the rights of policyholders. This research uses normative research with a comparative approach and legislation. By studying the sustainability of the Financial Services Compensation Scheme in the UK and the Life Insurance Policyholders Protection Corporation in Japan, the research recommends that the Indonesian government promptly establishes a Policy Guarantee Corporation, either as an independent institution or in conjunction with the existing Deposit Insurance Corporation for the banking sector.

Unbanked and impoverished? Exploring banking and poverty interactions over time

AbstractIn 2019, the Federal Deposit Insurance Corporation (FDIC) reported that 7.1 million households in the United States (5.4%) were unbanked and lacked a checking or savings account). Using three leading household surveys, this paper documents how the interaction between bank access and poverty has evolved over time. We present a historical time series of unbanked rates, showing high‐unbanked rates for those in poverty even with increases in financial access over time. In the 1980s, 49.6% of households in poverty were unbanked while 22.8% were unbanked in 2019. Unbanked rates were even higher for Black and Hispanic households that were in poverty. In the 1980s, these groups had unbanked rates of 73.6% and 66.5% which declined to 38.4% and 31.8% in 2019, respectively. To explain differences in banking rates by race, we use binary Kitagawa‐Oaxaca‐Blinder decompositions. Socio‐demographic characteristics explain less than half the difference in unbanked rates for Blacks and around half for Hispanics.

A Comparative Machine Learning Survival Models Analysis for Predicting Time to Bank Failure in the US (2001-2023)

<p style="text-align:justify"><span style="font-size:10.5pt"><span style="font-family:等线"><span dir="ltr" lang="EN-US" style="font-family:"Cambria",serif"><span style="color:black">This study investigates the likelihood of time to bank failures in the US between 2001 and April 2023, based on data collected from the Federal Deposit Insurance Corporation's report on "Bank Failures in Brief - Summary 2001 through 2023". The dataset includes 564 instances of bank failures and several variables that may be related to the likelihood of such events, such as asset amount, deposit amount, ADR, deposit level, asset level, inflation rate, short-term interest rates, bank reserves, and GDP growth rate. We explore the efficacy of machine learning survival models in predicting bank failures and compare the performance of different models. Our findings shed light on the factors that may influence the probability of bank failures with a time perspective and provide insights for improving risk management practices in the banking industry.</span></span></span></span></p>

Alternative model of Islamic deposit insurance for the Islamic banking system

Purpose This paper aims to develop a novel approach to Islamic deposit insurance, specifically addressing the deficiencies in the current prevailing models of Islamic deposit insurance. Design/methodology/approach The analysis in this paper adopts a qualitative content analysis approach to review the existing literature on Islamic deposit insurance and propose a new model. Findings The proposed model includes a revised scheme. In the event of a bank failure, the funds used to reimburse depositors of the failed bank are divided into two distinct categories. The first category includes nonrepayable premiums that have been previously paid by the failed bank and managed by the Islamic deposit insurance agency or Islamic deposit insurance corporation. The second category comprises qard hasan, an interest-free loan provided by the Islamic deposit insurance agency or Islamic deposit insurance corporation using the deposit insurance funds from the collective pool of premiums of other banks. Practical implications The proposed model ensures that well-managed banks are not unfairly burdened by the failures of their poorly managed counterparts, thus preventing a sense of unfairness and inefficiency. Implementing the proposed model may result in higher business practices and risk management standards, ultimately leading to better depositors’ protection and banking system’s stability. Originality/value This paper offers a significant contribution to the limited literature on Islamic deposit insurance. The proposed model enriches the discourse and offers valuable insights for the future development of Islamic banking.

The Effect of Job Loss on Bank Account Ownership

AbstractWe estimate the effect of job loss on households’ bank account ownership using novel data: Federal Deposit Insurance Corporation (FDIC)‐sponsored biennial supplements to the Current Population Survey (CPS), linked to respondents’ work history in surrounding months constructed from the Basic Monthly CPS. Leveraging differences in the timing of unemployment spells across households, we show that job loss leads to a large decrease in the likelihood of having an account among the lower‐income, renter households we study. Job loss also leads to increased use of other products and services that might substitute for a bank account, including prepaid cards, check cashing, and money orders.

A Commentary on the Silicon Valley Bank Debacle

SUMMARY KPMG issued its audit report for the parent company of Silicon Valley Bank (SVB), SVB Financial Group, on February 24, 2023, and the bank’s assets were taken over by Federal Deposit Insurance Corporation regulators on March 10. Although depositors began fleeing SVB in February, deposits declined by 13 percent during the preceding fiscal year. SVB invested substantially in long-term government bonds, whose value plummeted due to significant Federal Reserve interest rate increases, and the classification of the securities prevented their conversion to cash to meet depositor demands. Alongside explaining management and regulatory failings that led to SVB’s collapse, this paper formulates an argument of possible alternative actions the auditor could have pursued during the audit or upon release of its audit report. Due to inaction, KPMG may hinder its ability to defend against current litigation.

THE SMALL CLAIM COURTS DURING COVID-19: ANALYSIS OF INDONESIAN BANKS’ CLAIMS ON BAD CREDIT

The purpose of this study is to discuss the suitability of small claim courts to solve bad credit claims that are filed by banks as an alternative to dispute contract defaults. The study analyses the trend of banks’ small claims during the COVID-19 pandemic. This study employed an empirical normative approach. It combines a normative legal approach and additional empirical elements in the form of cases and decisions. The results show that some of the regulations that were released before the pandemic, such as the Regulation of the Supreme Court Number 4 of 2019 on the Settlement of Small Claim Courts, provide benefits for banks to settle credit disputes because they allow various expansions. The Regulation of the Supreme Court Number 3 of 2018 on The Administration of Cases in Electronic Courts has introduced some electronic applications. Although business (bank) litigation remains dominant, the trend of bank claims in the middle of the COVID-19 pandemic has dropped. In contrast, the trend of individual claims has increased significantly. The decline is influenced by countercyclical policies that are issued by the Financial System Stability Committee. The committee members consist of representatives of the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Deposit Insurance Corporation. It aims to handle and cope with the banks’ crisis related to the pandemic.

Peran Otoritas Jasa Keuangan dan Lembaga Penjamin Simpanan dalam Menjaga Stabilitas dan Keamanan Sistem Keuangan

The Financial Services Authority (OJK) is an institution that is independent and free from interference from other parties that has the functions, duties, and authority to regulate, supervise, examine, and investigate as referred to in Law No. 21 of 2011 concerning OJK. The establishment of this banking financial services sector supervisory institution was established in accordance with the mandate of Law Number 3 of 2004 concerning amendments to Law Number 23 of 1999 concerning Bank Indonesia. This research uses the literature review method. This research combines various sources of literary information, namely books, scientific journals, newspapers, the internet, and theses related to the topic, namely "The Role of the Financial Services Authority and the Deposit Insurance Corporation in maintaining the Stability and Security of the Financial System". The financial system has a very important role in the economy. Instability of the financial system can cause economic turmoil. Restoring an unstable economic system requires very high costs and a long time to restore public confidence in the financial and banking systems. LPS has two functions, namely protecting bank customer deposits and liquidating or liquidating banks that are known to be in poor health or insolvent. LPS has successfully strengthened and restored public confidence in the financial and banking system.

Prepaid cards and the unbanked in the U.S.: financial innovations and financial inclusion

PurposeFinancial inclusion is measured by the number of people who use the formal financial system and banks in particular. Limited access to formal banking services and the existence of unbanked households is a main policy concern. The authors evaluate how the use of prepaid (reloadable) debit cards by unbanked households affects financial inclusion and specifically the potential for these households to participate in the formal financial system and open a bank account.Design/methodology/approachThe authors apply matching models to analyze survey data from the Federal Deposit Insurance Corporation National Survey of the Unbanked and Underbanked Households from 2009 to 2019 and evaluate how prepaid cards use affects plans to open a bank account.FindingsUnbanked households who use prepaid cards are 5% less likely to open a bank account compared to the matched nonusers of prepaid cards. In addition, prepaid card users are 12% more likely to use nonbanks to transfer money/transact online and 18% more likely to have obtained loans from alternative financial services providers compared to the matched unbanked nonusers of prepaid debit cards.Originality/valueNo previous work has estimated the causal impact of use of prepaid cards on financial inclusion.

Digital Banking dalam Akselerasi Pemberdayaan Ekonomi Womenpreneur Indonesia : Eksplorasi Sosial-Ekonomi dan Peran LPS Berbasis PLS-SEM

ABSTRACT Integrating technology in the digital 5.0 society, including artificial intelligence, cloud computing, and financial services, is creating a new business model: digital finance (FinTech). Indonesia's focus on economic logistics systems, FinTech development, and economic integration has positively impacted the real economy. However, digital financial innovation also brings risks, such as market uncertainty. After the pandemic, digital financial inclusion empowers women to reduce the gender gap. The history of women's economic role, such as in early Islam, highlights their success in this sector. Government measures, such as inclusive programs, show efforts to encourage women's role in the digital economy but improved financial literacy and structural support are still needed. This study aims to analyze the determinants of socio-economic conditions and the role of the Indonesian Deposit Insurance Corporation (LPS RI) in women's economic empowerment through digital banking services. This study chose a quantitative approach by conducting an online survey of 306 Indonesian womenpreneurs. The respondents' data was further analyzed using the SEM PLS analysis technique to test the proposed hypotheses. The results showed that digital banking is significant for womenpreneur empowerment in Indonesia. Financial literacy is strong, infrastructure is solid, and government support is in its favor. LPS RI protects digital banking services. recommendations including literacy campaigns, training, technology infrastructure, fiscal incentives, and government-LPS cooperation to advance womenpreneurs with financial technology.

Pengaturan Penjaminan Polis sebagai Upaya Perlindungan Dana Masyarakat dalam Praktik Perasuransian

Claiming an insurance policy is a complex issue. Sometimes, insurance companies refuse to pay claims for various reasons and cannot pay policyholders' insurance claims. Therefore, the presence of a policy guarantee institution is essential. Article 53, paragraph (4) of the Insurance Law stipulates that the Law regarding policy guarantee programs shall be formed 3 (three) years after the legalization of the Insurance Law. However, as mandated by Article 53, the policy guarantee institution has yet to be approved. Law Number 4 of 2023 concerning Development and Strengthening of the Financial Sector Development and Strengthening of the Financial Sector or PPSK answers this problem. The Law provides a new mandate to form an institution, the Deposit Insurance Corporation (LPS). The existence of a Policy Guarantee Institution as mandated by the Law No. 40 of 2014 concerning Insurance could not be embodied. Therefore, enacting Law No. 4 of 2023 concerning the development and strengthening of the financial sector will hopefully become the answer. This Law provides the duties and authority of the Deposit Insurance Institution (LPS) to guarantee policies to protect public funds. However, to achieve the goal of the new Law, there should be good coordination between the Financial Services Authority (OJK), the financial services industry supervisory institution, and LPS, the policy guarantee institution. These two institutions should synergize with each other in protecting insurance policyholders.

Law No 4 Of 2023 Reviewed From The Perspective Of Insurance Customer Protection

Objective: This research aims to analyze the juridical consequences of the enactment of Law No. 4 of 2023 on the explicit legal Protection of insurance customers in Indonesia.
  
 Methods: This type of research is normative research. The research uses secondary data consisting of primary and secondary legal materials. The data analysis technique uses qualitative data analysis, and the conclusion drawing technique uses deductive.
  
 Result: The research results show that the PPSK Law mandates the existence of a Policy Guarantee Institution under the Deposit Insurance Corporation. The regulations in the PPSK Law relating to the Deposit Insurance and Insurance Agency provide positive juridical consequences for explicit legal Protection for insurance company customers.
  
 Conclusion: The regulations in the PPSK Law relating to the Deposit Insurance and Insurance Agency provide positive juridical consequences for explicit legal Protection for insurance company customers, relevant to the theory of legal objectives for benefit that animates the formation of the PPSK Law.

Road Ahead: Post Collapse of Punjab and Maharashtra Cooperative Bank

This case is about challenges faced by the depositors and the entire banking system following the collapse of the Punjab and Maharashtra Cooperative Bank. The Deposit Insurance and Credit Guarantee Corporation insured the bank deposits, and the earlier deposit insurance coverage was $74 million, which was increased to $370 million in the Union Budget of 2020. This increase was attributed to the collapse of the Punjab and Maharashtra Cooperative Bank, where 0.3 million people lost their money.

Portfolio Diversification and Return on Equity of Deposit Money Banks in Nigeria

Portfolio Diversification and return on equity of deposit money banks in Nigeria for the period 1990-2020 is the focus of this paper. Treasury bills, acquisition of ordinary shares capital, investments in subsidiaries, and foreign investments outside Nigeria were the explanatory variables and proxies for Portfolio Diversification while return on equity is the dependent variable for all deposit money banks in Nigeria, for the periods under review. In the course of the study, data were obtained from the website of Central Bank of Nigeria statistical bulletin and annual report of Nigerian Deposit Insurance Corporation (NDIC). The Augmented Dickey Fuller (ADF) test option was used to test for unit roots. The autoregressive distributed lag (ARDL) and bounds test tools were used to estimate the short and long run relationships respectively. The study discovered that at short run, treasury bills, and ordinary share capital are negatively related and not significantly related to return on equity, while investments in subsidiaries and foreign balances outside Nigeria are positively related to return on equity of DMBs at most lag periods. It was further observed that at different lag periods, the variables do not significantly predict the direction of return on equity of DMBs. Long run relationship was also observed to exist amid treasury bills, acquisition of ordinary shares capital, investment in subsidiaries, foreign investments outside Nigeria and return on equity of all deposit money banks in Nigeria for the period 1990- 2020. At short run period, DMBs should diversify into investments in subsidiaries, as this would improve return on equity. Deposit Money Banks should also diversify into foreign holdings that would yield positive net present values. Deposit money banks in Nigeria should diversify into foreign investments with the right mix that would improve retur

Legal Protection of Depositors' Funds in The Event of Bank Liquidation

In general, a bank is a financial intermediary institution generally established with the authority to accept money deposits, lend money, and issue promissory notes or what is known as banknotes, banks in carrying out one of their functions are collecting funds from the public in other words, storing funds in the bank gets the benefit of interest for customers, in this case not all the benefits promised by the bank can be realized the higher the interest it seems that we as customer consumers feel benefited, but in reality there are banks that provide high interest after that the health of their banks decreases so that it has an impact on customer consumers on their savings at the bank. The formulation of the problems raised in this study are 1). What are the consequences or legal consequences for banks in the placement of funds that are not in accordance with the LPS policy in the event that the bank is not healthy? 2). How is the legal protection of depositors in the event that the bank is liquidated by LPS? This research uses normative legal research methods, namely research by collecting and analyzing secondary data using secondary data sources only, namely books related to the problem, relevant laws and regulations, relevant court decisions, legal theories and relevant scholars' doctrine experts, and case studies related to legal issues, the theory used to analyze the theory of satisfaction, the theory of legal certainty and the theory of legal protection. The conclusion of this research is to provide protection to customers if they save funds in banks that are determined to be unhealthy by the Deposit Insurance Corporation so that customers feel safe if they want to save their funds in the banking world.

Analysis of Law No. 24 of 2004 on the Non-Participation of Baitul Maal Wal Tamwil as Deposit Insurance Corporation Participants

This research originates from statutory regulation number 24 of 2004 regarding the Deposit Insurance Corporation. The existence of these statutory regulations provides a sense of certainty for every customer in carrying out financing and savings activities at Islamic financial institutions. However, not all Islamic financial institutions are registered as members of deposit insurance institutions. One of them is an Islamic financial institution, Baitul Maal Wal Tamwil (BMT). Whereas in the Baitul Maal Wal Tamwil (BMT) there is customers' money that must be ensured for their savings deposits. Baitul Maal Wal Tamwil (BMT) Assyafi'yah, for example, in his financial reports from 2019 to 2021 has a large amount, in 2019 with a total deposit of Rp. 14,790,416,786, in 2020 with a total deposit of Rp.15,494,878,688, and in 2021 with a total deposit of Rp. 15,900,496,978. From the data above, it can be seen that in Baitul Maal Wal Tamwil (BMT) Assyafi'yah itself, the number of customer deposits increases every year but are still not registered as a deposit insurance institution. This research is a type of library research with the nature of descriptive qualitative research with a normative juridical approach. Research with the type of research library research is research with primary data sources and secondary data using a book, journal, or other scientific works related to this research and Law No. 24 of 2004 concerning Deposit Insurance Corporation. In the concluding part, the researcher will describe in narrative form why Baitul Maal Wal Tamwil (BMT) has not been registered as a participant in a deposit insurance institution.

Effect of Ownership Concentration on Agency Cost of Industrial Firms Listed on the Nigerian Exchange Group

This study investigated the effect ownership concentration on agency cost of industrial firms listed on the Nigerian exchange group. The specific objectives were to examine the effect of government ownership, managerial ownership, institutional ownership and foreign ownership affects agency cost of firms listed on the Nigerian exchange group. Panel Least Squared (PLS) method of data analysis was used. Secondary sources of data were employed; the interested variables were sourced from the annual report of the quoted industrial firms. The variables were assets utilization as the dependent variables while government ownership, managerial ownership, institutional ownership and block ownership were the independent variable. The study employs descriptive statistics, correlation and regression analysis in the analysis. From the analysis result the study found that. Government ownership has no significant impact on agency cost of firms listed on the Nigerian exchange group (t-test 1.539283, p=0.1286). Managerial ownership has significant impact on agency cost of firms listed on the Nigerian exchange group (t-test 4.541870, p=0.0000). Institutional ownership has significant impact on agency cost of firms listed on the Nigerian exchange group (t-test -3.443344, p=0.0005). Foreign ownership has negative and insignificant effect on agency cost of firms listed on the Nigeria exchange group (t-test -0.336863, P= 0.7372). The researcher recommends that. Government ownership of sensitive firms should be minimized, as such ownership are usually inefficient and characterized by bureaucratic bottlenecks, which do not have clear incentives to improve asset. The study recommends that financial regulatory bodies in Nigeria such as the Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC), and Securities and Exchange Commission (SEC) should ensure that a reasonable degree of managerial ownership is maintained by all banks due to its potential ben

Innovation Diffusion and Sustainable Development of Deposit Money Banks in South-South Nigeria: The Moderating Role of Entrepreneurial Marketing

Many deposit money banks in Nigeria are utilizing new technologies to innovate their products and services. But amidst these wins are some legitimate concerns about the credibility of the banks, customer trust, banks’ technical competence, capability to adopt innovations and the ability to sustain development. Framed by the diffusion of innovation (DOI) theory, this study explored the relationship between innovation diffusion and sustainable development of deposit money banks in Nigeria and the moderating role of entrepreneurial marketing. A quantitative and cross-sectional survey research design was adopted to consider three (3) hypotheses formulated for the study. Based on a population size of twenty-two (22) deposit money banks in south-south Nigeria, (Nigeria Deposit Insurance Corporation (NDIC), 2022), two (2) respondents; branch managers and marketing managers were drawn randomly from each of the banks for the survey. Therefore, forty-four (44) copies of questionnaire representing the total respondents were suitably designed and administered to obtain primary data. The face validity of the questionnaire was determined by experts comprising of researchers and business practitioners with satisfactory knowledge of the subject matter. The construct and content validity were established from earlier researchers who used it, but with few adjustments. The Cronbach's Alpha Coefficient reliability measure was also applied to determine the internal consistency of items in the questionnaire using Statistical Package for Social Sciences (SPSS). The Pearson moment correlation coefficient was used to determine the degree of relationship between the dimensions of innovation diffusion (product innovation diffusion and process innovation diffusion) and sustainable development. Partial correlation was used to examine moderation of entrepreneurial marketing on the relationship between innovation diffusion and sustainable development. Findings reveal that inn

Analysis of Bank Saving Growth Below IDR2 Billion in Indonesia

The COVID-19 pandemic, global economic shocks, and global geopolitical risks have resulted in the banking industry facing global uncertainty that affects both banks and customers. This uncertainty has grown significantly in recent years. This research examines the differences between the periods before and after the COVID-19 pandemic and the long-term and short-term effects of inflation, BI-7DRR, deposit rates, SBN yields, and the COVID-19 pandemic on DPK growth. The research utilizes the Difference Test and the Error Correction Model methodologies. The study reveals differences in DPK, BI-7DRR, deposit rates, and SBN yields before and during the COVID-19 pandemic. The findings indicate that inflation, BI-7DRR, deposit rates, and the COVID-19 pandemic have a long-term impact but do not exhibit a short-term impact. Meanwhile, SBN yield has no long-term or short-term effect on DPK growth. Inflation affects the growth of DPK in the long term because people see the direction of economic conditions. BI-7DRR has a long-term with DPK because banks require a time lag. The level of DPK does change in the long term because banks must adjust interest rates based on economic conditions. Increased savings in banks because people see the COVID-19 pandemic as a shock economy. Disclaimer: All views in this paper are the authors' and do not necessarily reflect the views of Indonesia Deposit Insurance Corporation (Lembaga Penjamin Simpanan).