Deposit Insurance Fund Research Articles

The indebted consumer: A microsociological analysis of the non-performing loan market

Despite efforts, default remains a reality of credit relations, leading to the emergence of non-performing loan (NPL) markets. In these markets, specialized firms purchase bad loans at discounted rates, aiming to collect debts or resell them. With unsecured consumer credits comprising a significant portion of NPL purchases, the exponential growth of the consumer credit market in Türkiye has exacerbated NPL issues. Following the 2001 banking crisis, the Savings Deposit Insurance Fund facilitated the sale of NPLs to asset management companies (AMCs), a practice later adopted by private banks. Defaulted borrowers lack control over the sale of their debts, often experiencing persistent contact from AMCs offering assistance. However, complaints regarding the quality and language of AMC services persist, underscoring issues of stigmatization and harassment. Drawing on netnographical research and discourse analysis, this study examines the Goffmanesque frames through which AMCs restructure (in)formal default patterns in personal debt relations during NPL restructuring.

CMDI Resolution Funding and State Aid Control

Abstract The State aid regime has dominated crisis management in the EU financial sector ever since the Global Financial Crisis. Even with the BRRD/SRM resolution framework taking effect, most European banks in distress continue to receive public financial support subject only to the State aid regime. However, it is one of the declared aims of the CMDI reform proposals to (further) reduce the bank-sovereign nexus by making it easier for banks of all sizes to access industry-financed resolution and deposit insurance funds instead of obtaining financial support directly from State budgets. This paper explores how the CMDI framework and the State aid regime currently interact and how this would change pursuant to the CMDI reform proposals. It argues that these reform efforts will be unlikely to make much of a difference and that, following their implementation, failing institutions will continue to be channeled away from the BRRD/SRM resolution framework towards a State aid-based assessment and treatment.

Funding deposit insurance

Funding deposit insurance

Административно-правовой статус Агентства по страхованию вкладов

The article examines the Deposit Insurance Agency (hereinafter referred to as the Agency), determines its administrative and legal status. All the powers and functions of the Agency have been analyzed. The problem of the legal status of the Agency as a state corporation, including in the bankruptcy procedure, is investigated. The Agency is a special state corporation with responsibilities to carry out effective and responsible management of funds included in the deposit insurance fund. He also has the right to act as a bankruptcy trustee. The Agency is the main link in the banking system of the state, ensuring effective protection of depositors from loss of insured deposits, as well as stable operation of the banking system as a whole, increasing the level of confidence of the Russian population in the banking system, which coordinates the work of the deposit insurance system based on the legislation of the Russian Federation.

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.

Deposit Insurance and Bank Funding Stability: Evidence from the TAG Program

Deposit Insurance and Bank Funding Stability: Evidence from the TAG Program

Bank restructuring under asymmetric information: The role of bad loan sales

Bank restructuring under asymmetric information: The role of bad loan sales

FUNCTIONAL CORRELATION BETWEEN BANK ASSETS AND INSURED DEPOSITS IN BOSNIA AND HERZEGOVINA – THE PERSPECTIVE OF THE DEPOSIT INSURANCE FUND

The projection of insured deposits level in banks is of the key importance for the financial planning of the Deposit Insurance Fund as an integral part of the deposit insurance system. On the one hand, in a situation when banks fail, Deposit Insurance Fund are used for payouts of insured deposits in those banks or for financing processes of resolution such banks, which represents a real outflow of the Fund. On the other hand, the main regular inflows into the Deposit Insurance Fund are realized from insurance premiums which, as a rule, are calculated on the basis of insured deposits in all banks. The research problem posed in this paper is how to predict changes in the level of insured deposits in banks, that is, how this level in banks changes in relation to the total assets of the banking sector. The research covered the period from 2009 to 2021. The level of insured deposits in banks was set as the dependent variable and the level of bank assets was set as the independent variable. The research was conducted on the banks operating in Bosnia and Herzegovina. The research confirmed the significant conditionality of the growth of insured deposits with the growth of the bank assets, and also opened up some new directions for further research in terms of the influence of other elements on the financial planning of the Deposit Insurance Fund and the presence of moral hazard in the banking sector.

Bridging the gap from the current deposit insurance fund to a fund target

Bridging the gap from the current deposit insurance fund to a fund target

Regulatory Regime Governing Deposit Insurance under the Ethiopian Law: A Comparative Review in Light of International Core Principles’ Perspectives

Adopting deposit insurance has become an increasingly custom to ensure the stability of banking systems and protect bank depositors from incurring large losses due to bank failures. Almost in all jurisdictions there are financial safety nets in place to guarantee the safety of the banking system and its depositors. It also inspires trust in the system and safeguards against any shocks. It has got a global recognition which has got the status of international core principles of deposit insurance. Unlike its previous trend, Ethiopia is recently taking significant measures to liberalize the previously state owned service sector. In September 2022, the Ethiopian council of ministers have approved the long awaited act the national financial policy that allows foreign banks to engage in banking business in Ethiopia. This measure is very significant as it marks a breakthrough in the opening of the door for foreign banking investment in Ethiopia. It was revealed in many studies that countries which undergone a finance liberalization have encountered a financial crisis. In most of the states, explicit deposit insurance has been adopted after they have encountered a banking crisis. Unlike these states, Ethiopia has not yet experienced any events of bank failure. However, the country has enacted a regulation that governs the Establishment and Operation of Ethiopian Deposit Insurance Fund ahead of banking liberalization to foreign banks. Hence, this step can be quantified as a wise approach measure that has drawn lessons from other states’ failure. In this paper, a modest attempt is made to comparatively review the Ethiopian deposit insurance regulation in light of the international core principles that serve as standard for harmonization. The Ethiopian deposit insurance legislation stepped miles to accommodate most of the core principles of the IADA and BCBS. The law governs deposit insurance by explicitly separate legislation in addition to the prudent legislation provided for regulating the financial sector. Most of the contents of the legislation comply with core principles of DI. However, there are also loopholes and vagueness in governing specific issues of deposit insurance that should require reconsideration in the subsequent legislation.

Türkiye’de Katılım Bankacılık Sistemi ile İlgili Örnekler

In this study, it has been tried to reveal the success levels of participation banking systems within the general banking system by giving examples in terms of the size of the participation banking system within the general banking system and the performance of the participation banking systems in terms of factors such as service diversity, numerical proportionality and dividend distribution since the establishment of the participation banking systems. . The interest-free banking system, which is called the participation banking system, came out of the idea stage in the 1970s and started to be implemented in Egypt for the first time in 1976. Private Financial Institutions, which were established in Turkey in 1983 with the Statutory Decree (Executive Decree), and Participation Banks with their new names, have shown rapid acceleration on a global scale and especially in Turkey in the last twenty years. Participation banking system in Turkey has shown a serious development especially after 2001 and has become competitive with commercial banks. The fact that participation banking systems were subject to the Banks Law with the amendments made in 1999 and 2001 and that participation banking systems had similar rights in the legislation with commercial banks had a significant impact. Key Words: Private Financial Institutions, Participation Banking, Savings Deposit Insurance Fund

Case of Liquidity Risk: Demirbank

Liquidity risk is the possible loss of funds as a result of not being able to find the required amount of funds at an appropriate cost when needed or not being able to sell a financial asset at the required time and price. Briefly, it is the risk of maturity mismatch of cash inflows and outflows. Banks that use the short-term funds they collect in long-term assets are exposed to such a risk. Despite international regulations, it is observed that even in banks with sufficient capital levels, problems arise in the management and liquidity due to the change in risk appetites of different financial institutions in different periods. After the World War II, and especially with the effect of the liberalization policies of the Democratic Party in Türkiye, which was in ruling between 1950-1960, 24 new banks were established. In the case of Demirbank, which resulted to took over by the Savings Deposit Insurance Fund (SDIF) in 2000, especially all the process until the transfer of the bank to the fund, is a lesson to learn on liquidity risk management. In this article it is aimed to shed light on a period in Turkish banking history, the theoretical framework and the regulatory and supervisory processes and the reactions of related institutions.

Blessing or curse? Government funding of deposit insurance and corporate lending

Blessing or curse? Government funding of deposit insurance and corporate lending

As Eumênides e a Crise: responsabilidade, risco moral e dissuasão no sistema financeiro

We face objections against punishing financial firms and managers for producing risks for the financial system – that it’s either paternalistic or inefficient. Against the first: financial crises are so damaging that governments and deposit insurance funds have to intervene – an implicit guarantee to creditors. This is controversial from the perspective of political morality: it implies using resources from the public for the benefit of better-off people who willingly incur risks. So, we begin by studying a possible justification for this arrangement from the ‘incentives argument’ derived from the Rawls difference principle, in the light of G. Cohen’s criticisms. Against the second: we cannot completely dispense with coercive instruments - mainly for the moral hazard entailed by the implicit guarantee. Therefore, we conclude the threat of liability must have a punitive and a preventive character, extending to non-compliance with norms on risk even before generating major economic effects.

The Role for Deposit Insurance Funds in Dealing with Failing Banks in the European Union

The Role for Deposit Insurance Funds in Dealing with Failing Banks in the European Union

The Role for Deposit Insurance Funds in Dealing with Failing Banks in the European Union

The Role for Deposit Insurance Funds in Dealing with Failing Banks in the European Union

Evaluation of Target Deposit Insurance Fund Based on Credit Migration Approach for the Non-Life Insurance Sector in Korea

Purpose: In the case of non-life insurance business, the rate for the accumulation of fund in non-life insurance has fallen every year, making it difficult to reach the target fund level. Thus, we evaluate the appropriate target fund level for non-life insurers. Design/methodology/approach: The portfolio of the deposit insurer was constructed for 21 non-life insurers which were licensed non-life insurance businesses under the Insurance Business Act 4 (1) in Korea. We attempt to analyze the default probability using the Credit Migration method rather than the Merton. We derive the joint distribution for change in credit ratings and a loss distribution of the deposit insurer in non-life insurance sector by performing the Monte-Carlo simulation. The average value of the worst loss with a 0.5% probability in the loss distribution, TVaR99.5%, was adopted as an appropriate target fund level. Findings: The value of TVaR99.5% in this study was between 67 billion won and 2.434 trillion won. This amount of money is from 4.71% to 171.71% of the current deposit insurance fund for non-life insurers, and from 4.06% to 147.52% of the target fund level for non-life insurers. However, if a rather extremely conservative case that reflects the loss of deposit insurance funds due to the bankruptcy of up to 7 insurers among non-life insurers that consists of the portfolio is excluded, the distribution of the TVaR99.5% was between 67 billion won and 402 billion won. This money is from 4.71% to 28.28% of the current deposit insurance fund, and from 4.06% to 24.37% of the target fund level for non-life insurers. These results indicate that additional funding is unnecessary because the current level of deposit insurance funds will sufficiently cover future losses. Research limitations/implications: The limitation of this study is to evaluate the deposit fund under the RBC system, since it is controversial whether the RBC system adequately reflects the risk of non-life insurers. The risk of minimum guaranteed interest rate, catastrophe risk and liquidity risk are needed to be considered through further study. In particular, comparing the loss distribution for individual insurers under Solvency II and the RBC system is a future task of research. Originality/value: This study contributes to the evaluation of the target deposit insurance fund for non-life insurers by applying the credit migration method unlike the existing studies. This attempt is meaningful in that it provides an objective and practically easy-to-use alternative to the market participants such as the deposit insurer and non-life insurers.

Bridging the Gap between the Deposit Insurance Fund Target Level and the Current Fund Level

Bridging the Gap between the Deposit Insurance Fund Target Level and the Current Fund Level

存款保险基金保费规模变动问题研究——基于AD-AS模型分析视角

存款保险基金保费规模变动问题研究——基于AD-AS模型分析视角

Turkey Saving Deposit Insurance Fund Bank Recapitalization (2000–2001)

Turkey Saving Deposit Insurance Fund Bank Recapitalization (2000–2001)