Deposit Insurance System Research Articles

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.

The role of deposit insurance systems in improving liquidity risk management in Iraqi banks

The role of deposit insurance systems in improving liquidity risk management in Iraqi banks

The deposit insurer’s capacity assessment in the context of impact on the financial system stability

The paper is devoted to the development of a scientific and methodological approach to determining the indicators of the deposit insurer's ability to influence the financial system stability. The scale and complexity of the tasks of ensuring the immediate and gradual reconstruction of Ukraine, high dynamics and proper quality of economic growth, the functioning of the economy in the conditions of war and a constant external threat actualize the issue of increasing domestic investment potential and intensifying the transformation of household savings into investments. It creates challenges for the deposit insurance system. In the research structural and logical analysis, induction, comparison, and relative values were used. The capacity of a deposit insurer in the context of its impact on financial stability should be considered in the context of operational, resource and payment capacity, each of which can be assessed by an appropriate indicator. The operational capacity reflects the ability of the deposit insurer to influence the situation in the deposit market and perform the function of deposit guaranteeing. The normative value of the operational capacity indicator in Ukraine is proposed to be set at the level which, in the conditions of the dynamic banking sector of Ukraine and the deposit market as its component, will allow considering the slightest deviations of the indicator (μ+2σ). The resource capacity reflects the coverage level of guaranteed deposits by the insurer's financial resources. The normative value of the resource capacity indicator in Ukraine is proposed to be set at the level of 0.8%, which meets the requirements of Directive 2014/49/EU of the European Parliament and of the Council. The payment capacity reflects the sufficiency of the deposit insurer's financial resources to pay compensation to depositors in the future. The normative value of the payment capacity indicator in Ukraine, by analogy with the indicator of the ratio between insurance technical reserves and the average value of insurance payments, is proposed to be set at least 1 in annual terms and not less than 12 in monthly terms.

Deposit insurance system and commercial bank profitability: A quasi-natural experiment based on the deposit insurance regulations

This article examines the profitability of commercial banks in China, specifically focusing on the impact and processes of the deposit insurance system on banks` profitability. The consequences and underlying mechanisms are explored using a difference-in-difference model based on financial data from listed banks in China from 2007 to 2022. The findings indicate that implementing the deposit insurance regulation can promote commercial bank profitability. The positive effects are achieved by enhancing their risk-taking, liquidity, and growth ability. The findings is conducive to enhance the banking industry's growth and improve the financial services provided to the real economy.

APPLICATION OF BANK DEPOSIT INSURANCE LEGISLATION: MAIN ASPECTS

The article highlights the special relevance of the legal study of the bank deposit insurance system. The authors have identified the main trends in the historical development of the bank deposit insurance system, which are generally of positive importance. The article also analyzes the main problems of legislation and law enforcement practice in the field of bank deposit insurance. The conclusion is formulated that the legitimate interest of depositors should be protected primarily, while the established judicial practice in some cases indicates the opposite. In addition, the legislation on insurance of bank deposits violates the principle of equality of subjects of civil law. This situation leads to a drop in the level of depositors' trust and is an obstacle to the effective implementation of the bank deposit insurance system.

STRATEGY AND IMPORTANCE OF DEPOSIT INSURANCE SYSTEM IN GEORGIA

Georgia is a country that has chosen the path of development of European integration and, taking into account European practice and experience, introduced a deposit insurance system in the country at the cost of certain risks. From the point of view of socio-economic development in Georgia, the introduction of the deposit insurance system and its complete formation was related to the strengthening of the financial security system, the protection of depositors and the prevention of systemic crisis in the banking sector.
 The main goal of the paper is to study and analyze the strategy and importance of the deposit insurance system in Georgia and its economic and financial effects, both for the country and for the wide circle of users interested in this system. However, the problem lies in the fact that, despite the sharing of theoretical and practical experiences of various countries of the world, the mentioned issues still require refinement and formation as a final result.

Неявное страхование вкладов в России после пандемии

Implicit deposit insurance is the name given to the cases when citizens prefer allocating deposits within banks with state (government) ownership when the deposit amount exceeds the limit covered by the state deposit insurance system. Implicit deposit insurance has already gained the focus of research attention in Russia, but during the times of pandemics and limited to deposits for the region of Moscow. The current study uses more up-to-date data of 2023-24 and extends the regional coverage to 25 regions of Russia. We evidence that the earlier found U-shaped dependence of the deposit rate premium and the state bank size was inverted. Moreover, we argue that during the times of rising key rate the heterogeneity of implicit deposit insurance premium though present became more homogeneous in terms of sign of the premium than during the times of relatively low-key rate.

Insuring deposits, ensuring stability: A critical evaluation of six decades of deposit insurance in the Indian banking sector

The deposit insurance system in India is one of the oldest in the world. Though deposit insurance is a well-researched area across the globe, it is relatively unexplored in India. This paper aims to critically evaluate some of the core aspects of the Indian deposit insurer, explicate the strengths and weaknesses of the system, highlight the risks that accrue to the system due to its features and the lessons learned from its 60 years of experience. The study suggests that the Indian deposit insurance system is marred by certain issues, such as irregular revisions of coverage limits, cross-subsidisation, delays in the recovery of settled claims, the restricted role of the insurer and the non-availability of a benchmark for the insurance fund. It further provides policy recommendations for practitioners to overcome these shortcomings and enhance the robustness of the deposit insurer by allowing better risk management under the scheme.

DEPOSIT INSURANCE SYSTEM IN GEORGIA AND WORLD TRENDS

The deposit insurance system is one of the main challenges of Georgian Banking regulation, which serves as a safety pillow of financial stability. Over the past 5 years, Georgia has increased the minimum deposit insurance limit from 5,000 GEL to 15,000 GEL per bank in order to achieve greater stability in the financial market. Georgia has already made a decision to increase the limit to 30,000 GEL from January 1, 2024. We examined the impact of the deposit insurance system on the safety of customers of banking institutions by comparing the volume of accounts/deposits protected by the system with existing practices in neighboring economies. We find that increasing attention to the importance of deposit insurance has led to an increase in the interest of foreign depositors and investors in placing funds in Georgian banks, which contributes to the improvement of international ratings and credit worthiness of Georgian banks. Keywords: Deposit insurance, cost of deposit funding, resolution.

How Deposit Insurance Systems Impact the Risk Levels of Commercial Banks: An Empirical Analysis Using the Difference-in-Differences Method on A-Share Listed Banks

How Deposit Insurance Systems Impact the Risk Levels of Commercial Banks: An Empirical Analysis Using the Difference-in-Differences Method on A-Share Listed Banks

Оцінювання незалежності фонду гарантування вкладів фізичних осіб

According to the Key Principles of Effective Deposit Insurance Systems, an important guarantee of the proper functioning of deposit insurance is the independence of the deposit insurance body. The aim of the study is to develop a scientific and methodological approach to assessing the independence of the Deposit Guarantee Fund. The methods used in the study are the calculation of the composite indicator, the use of scores, analysis and synthesis. The publication formulates the criteria for the independence of the Natural Persons Deposits Guarantee Fund by its components: institutional independence – the term for which the managing director is appointed, the term for which the members of the administrative council are appointed, the requirements for the managing director when appointing to the position, the requirements for the members of the administrative council when appointing to the position, the procedure for appointing the managing director, the procedure for dismissing the managing director, the procedure for appointing members of the administrative council, the procedure for terminating the powers of the members of the administrative council, the conditions for the dismissal of the managing director, the conditions for terminating the powers of the members of the administrative council, the membership of directors in political parties, the ownership of corporate rights by managers; operational independence – regulation-making activities, judicial immunity of the Fund, requirements for avoiding conflicts of interest, prohibition to interfere in the activities of the Fund, international activities of the Fund, access to bank secrecy, administrative powers; financial independence – formation of internal organizational structure, sources of funding, budgeting, financial control procedure. In the context of improving the institutional independence of the Deposit Guarantee Fund, it is proposed to increase the term for which the managing director and members of the administrative board are appointed; to refer the issue of appointment and dismissal of the managing director of the Fund to the competence of the Verkhovna Rada of Ukraine on the proposal of the President of Ukraine; to regulate the membership of the Fund’s directors in political parties; to include independent members in the administrative board of the Fund. In order to strengthen operational independence, it is important to provide the Deposit Guarantee Fund with the right of legislative initiative, as well as access to bank secrecy. Improving the financial independence of the Deposit Guarantee Fund requires increasing the level of independence of financial control, as well as reducing the risk of non-repayment of the Fund’s debt to the State.

How Did Depositors React to Bank Risks During the Covid-19 Outbreak in Indonesia?

The Covid-19 outbreak provides a unique setting to examine the association between deposits and bank risk, including loan risk, as both deposits and loan risk increased significantly during the outbreak. Employing dynamic regression models in datasets from the Indonesian banking industry before and during the Covid-19 outbreak, this study provides new evidence that depositor discipline is stronger during the outbreak, as depositors are more sensitive to loan risk. The findings are different from prior studies in that depositor discipline tends to diminish during the crisis period. Furthermore, this study confirms the effectiveness of the deposit insurance system implementation, as uninsured depositors exercise stronger discipline. Last but not least, this study documents that depositor discipline is weaker in government banks as those banks are perceived as having implicit guarantees from the government.

On the issue of the development of the regulatory framework for ensuring the financial stability of the deposit insurance and pension savings system in the Russian Federation

The article examines the regulatory framework for ensuring the financial stability of the national deposit insurance system, its modern structure, highlights the problems and prospects for development. The purpose of this study is to substantiate the need to develop the regulatory framework for the functioning of the deposit insurance system, ensuring an increase in its financial stability. Based on the results of the study: the need to clarify the terminological apparatus of the application of regulatory legal acts in the field of the organization of the insurance system in connection with the inclusion of funds of non-state pension funds in the part of voluntary pension funds (2022) and formed pension rights within the funded part of the pension for compulsory pension insurance (2014) is justified; the criteria of the nature of the financial condition of financial institutions participating in the deposit insurance and pension savings system, as well as their weight values used to clarify the size of differentiated contributions for the formation of insurance funds, are proposed; the need for the introduction of regulatory monitoring of financial stability in order to form tariff requirements for participants in the deposit insurance and pension savings system – banks and non–state pension funds is substantiated.

How does deposit insurance affect household's risk sensitivity？Evidence from China

Based on the differential protection of household deposits and wealth management products in the limited deposit insurance system, this paper explores effectiveness of bank market discipline and the impact of deposit insurance on market discipline. Using the panel data of Chinese banking industry during 2010–2016, the empirical result shows that, firstly, households are sensitive to bank risks such as capital to asset ratio and non-performing loan ratio (NPL ratio) during the period 2010–2016. Thus, market discipline plays a certain role in the banking industry before introducing deposit insurance. Secondly, deposit insurance increases the risk sensitivity of banks’ wealth management products to capital to assets ratio and NPL ratio, while reducing the risk response of household deposits to these two ratios.

Regulation in the Banking Sector of Bosnia and Herzegovina and Deposit Insurance Systems

Problems in the bank's operations, regardless of its size, are reflected in the overall financial system in which losses can occur, unless the state does not prevent the disruptive influence of the problematic bank at the level of the overall banking sector in a timely manner. One of the ways to prevent possible problems in the financial system of a state is to conduct supervision of the bank's operations. A safe and transparent banking system affects the increase of savers who decide to invest their capital in banks. Monitoring of bank's operations in Bosnia and Herzegovina is not carried out only by supervisory and regulatory bodies. Banks are obliged, according to Basel II, to publish general information about the adequacy of capital and its structure, about exposure to risks such as market, card, operational, interest rate risk. Within the banking sector it is possible to identify some of the sources of their weaknesses, such as: inadequate bank management structure, the presence of implicit or explicit forms of government guaranteeing deposits, lack of information on the financial position and status of the bank due to the application of inadequate accounting standards.

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.

Development of the bank deposit insurance system in Ukraine

The paper examines the peculiarities of the formation and development of domestic bank deposit insurance systems. It has been established that one of the conditions for the normal operation of the banking system is the presence of appropriate systems to support their viability - bank deposit insurance systems. To date, such systems, with rare exceptions, function in most countries with a market economy. Bank deposit insurance systems perform two equal functions: first, they protect individuals and legal entities - clients of the banking system from the loss of their deposits (both partial and full) by paying insurance compensation; secondly, provide financial support to insolvent credit organizations, thereby stabilizing the banking system as a whole. It was established that the creation of the domestic insurance system of bank deposits was based on the American model with appropriate adaptation to domestic realities. Two main stages of the development of the system of protection of bank deposits in Ukraine are distinguished: 1. The nascent period (1998-2012). It is characterized by active legislative regulation of relations in the field of deposit insurance, practical experience is gained and its systematization is carried out, mistakes made are analyzed. 2. Stabilization period (2012 - to date). It is characterized by a comprehensive update of the legislative regulation of relations in the field of deposit insurance. Point changes are made to the current legal field taking into account crisis situations arising in the financial sphere of Ukraine. The domestic system of insurance of bank deposits provides citizens with the return of their funds placed in banks, in the event that the latter are unable to satisfy the demands of depositors regarding the return of their deposits.

Bank Runs and Design Flaws of Deposit Insurance

Deposit insurance systems are designed to balance the benefits of preventing bank runs and protecting ordinary savers against the costs of reduced market discipline and potential burdens on taxpayers. Design flaws of deposit insurance make the benefits too low and the costs too high. This paper presents an example in which solvent banks can effectively manage runs, depositors discipline banks to a reasonable extent, and taxpayers have a fair deal. It has three key features: the bank’s authority to activate deposit insurance early, a coinsurance scheme that transfer money from those who run on solvent banks to those who stay put, and a shareholder position for taxpayers. Early activation of deposit insurance prevents fire sales of assets and provides opportunities to verify the bank’s solvency. The coinsurance scheme weakens the incentive to run and strengthens the incentive to hold on to their accounts. As shareholders, taxpayers receive dividends in normal times in exchange for large payouts in catastrophic events.

Deposit insurance system, risk-adjusted premium and bank systemic risk: Evidence from China

In this paper, we investigate whether and how the Deposit Insurance (DI) system and its Risk-adjusted Premium (RAP) scheme affect the systemic risk of Chinese banks. Based on bank-level panel data from 2007 to 2020 and the difference-in-differences (DID) method, we find that the establishment of the explicit DI system in China increases bank systemic risk, while the implementation of RAP alleviates this negative impact by reducing systemic risk. We further find the mechanism behind this phenomenon that bank profit acts as a mediator. We also find evidence for international heterogeneity using cross-country data and show that, as China has a longstanding implicit government guarantee, the establishment of explicit DI actually reduces the extent to which banks are protected, thus increasing bank systemic risk. Our study highlights the specificity of Chinese DI system, offers important policy implications for the design of financial safety nets in China and worldwide.

Defect Repair Deposit and Insurance Premium for a New Home Warranty in Korea

Disputes due to defects in newly built houses are increasing worldwide. A house builder is responsible for repairing any defects in a newly built house. However, since house builders’ risk of closure and bankruptcy are increasing due to aggravated disputes and economic crises, builders may become insolvent and fail to perform defect repairs. In preparation for this, many countries have established defect repair deposit or guaranty insurance systems; however, the standards for these systems are not based an objective evidence since the current standards were arbitrarily established during industrialization. It has been pointed out that Korea’s housing defect repair deposit has been set excessively high and is being abused in disputes. Based on dispute cases in Korea, this study analyzed housing construction costs, deposits, and defect repair costs, resulting from lawsuits due to defects. The results confirmed that the defect repair deposit has been set too high compared to incurred defect repair costs. In addition, it was found that the guaranty insurance premium in lieu of the housing defect repair deposit was excessive compared to the damage caused by builder insolvency. In order to improve this, in this study, we proposed two alternative plans in which the housing defect repair deposit was set at a certain percentage of the construction cost based on the current Korean standard. In addition, based on the concept of different deposit levels using the scale of housing construction, such as in Australia and Canada, two additional alternative plans with different deposit ratios for each scale of housing construction were presented. The comparison results for housing defect repair deposits and guaranty insurance premiums based on the four presented alternative plans accompanied by actual cases showed that all the alternative plan deposits were higher than the actual defect repair costs. Even in the case of a guaranty insurance premium, the level was at least twice as high as the damage caused by builder insolvency. Therefore, all the alternative plans can fulfill their original role of protecting homeowners in the case of builder insolvency. At the same time, reducing the guaranty insurance premium to reflect the cost of housing construction is possible, and would benefit both house builders and home buyers. The results of this study are valuable as a reference for other countries considering establishing or revising a housing defect repair deposit system. Specifically, these findings, which analyzed the case of Korea’s socioeconomic changes as it transitioned from a developing country to a developed country, can provide important information for many developing countries operating housing defect repair deposit policies and systems.