Study Of Moral Hazard And Pricing Of Deposit Insurance

According to information economics point of view, because of asymmetric information and other reasons, deposit insurance as a kind of non-profit public goods, because of their own limitations, will inevitably lead to moral hazard. It can not expect the bank to reduce operational risks and protection of depositors when the moral hazard exists in the circumstances. And it will also encourage banks to engage in a higher risk of the operation, leading to "bad-currency coins expulsion".In this paper, we will first starting with the risk of moral hazard, as taking into account the situation on the basis above. Using game theory methods to find an effective way to eliminate the moral hazard in determining the existence of the risk of moral hazard is indeed the case.The determining of the cost of bank deposits insurance, we can also call it deposit insurance pricing, is the key link to solve the moral hazard is. Various research findings also show that the deposit insurance pricing is the core link to develop deposit insurance system. In view of China is implementing the implicit deposit insurance system. We can combine foreign experience to develop its own suitable pricing model of deposit insurance.Based on the above considerations, we selected 43 countries in 1994-2003 which deposit insurance system has been implemented to establish an econometric model. In cross-section heteroscedasticity allowed and sequence the relevant circumstances, with generalized least squares GLS (cross-section weights) the establishment of model estimates, respectively inspected the many variables on the impact of the deposit insurance pricing. The above equation that it can only know that a national bank's overall pricing, the pricing for the specific bank needs to further consideration. The author introduce the more commonly used method of project assess, and using ambiguous language ladder index value of the grey correlation analysis to account all banks' membership of a country. The membership level of each bank can also be attached to the corresponding counterparts of the deposit insurance pricing. Then determine the deposit insurance pricing model for specific banks.