Deposit Insurance System And Its Built In China

Finance plays a key role in the modern market economy. How to ensure its stability and effective operation is an important issue. As a part of Financial Security Net, Deposit Insurance System (DIS) has unique functions in maintaining the financial stability and protecting the depositors'interests. Nowadays, DIS has been adopted to defense the contagion of banking risk and decrease the financial crisis in many countries. With the reform of more than 20 years, our banking industry has made a quite great progress. At the same time, problems still exits, such as low efficiency and poor payoff. Great risks accumulate in the development as well. This article analyses some key points of DIS theoretically and practically, and then put forward its blueprint of DIS of China. With the above research, the author wants to make efforts to introduce DIS into China soon. This thesis has three sections. Section One discusses the basic theory of deposit insurance, such as the frangibility of banking industry and the goals and functions of deposit insurance, focusing on the correct methods of understanding and evaluating the moral hazard problem. The article believes that the proper design of DIS does help to control the moral hazard, but there are still other ways to reduce it. Section Two introduces the DIS of US, Germany and EU and draw some helpful concludes and suggestions after the comparison of these three systems. The last section focuses on the practical status of Chinese financial institutions. With studying the problem existing in the development of banking industry and the shortcomings of implicit deposit insurance system, the thesis makes a general design of DIS for China. The author collected a great deal of original information and emphasized on the authority and novelty of quotations. On the content arrangement, this article skips some aspects which have been discussed a lot and pay a lot of attention to several controversial issues. On the basis of extensive analysis of research work of famous organizations and experts homely and abroad, the article sets forth the following viewpoints: Firstly, we should give fully view and objective evaluation to the moral hazard problem. Moral hazard doesn't derive from deposit insurance. The way to control it includes but not limited to prudent design of DIS. Enhancing the corporation governance and internal control and enforcing the banking regulation and supervision are effective ways as well. Secondly, the establishment of DIS needs effective systematic environment. Thus, we should emphasize on the reform of the banking property structure, the improvement of corporation governance and the enhancement of prudential banking regulation and supervision. Thirdly, the design of DIS should take both the feasibility and perspective into consideration. The construction of public and private DIS and design of the premiums could embody such theory. The last but not the least, DIS could be classified into two parts: the system in normal times and the system in a time of crisis. Besides enacting specifically the relative points of DIS in normal times in detail, the blueprint should also regulate the important issues of DIS in a time of crisis, while leaving the concrete rules to be regulated according to the specific circumstance in the crisis.