Control Of The Laws Of The Moral Hazard Of Deposit Insurance System

Frangibility of bank is the foundation of bank crisis. The bank once appears the crisis, it will bring very bad influence to the financial and economic situation. In order to withstand the adverse effects of the banking crisis, many countries plan to set up deposit insurance system. Deposit insurance is a special kind of insurance with the dual functions that it manager to avoid bank crisis beforehand and insure the deposit security after bank's bankruptcy. So, deposit insurance system features a helping mechanism based on reliable substance and corresponding law against risk. However, the system changes the incentive and restrictive mechanisms between the depositors,banks,financial regulators and the deposit insurance agencies, it will probably give rise to moral hazard ,and even bring the banking system to abys. Moral hazard can bring massive loss to the depositor,the banks as well as the deposit insurance agencies. At present, China is formulating the "deposit insurance rule" attempts to establish the deposit insurance system in China. In this context, we should well design the deposit insurance system: practice mandatory insurance and part insurance,design reasonable premium rate and claim standard and through strict accountability mechanism to control moral hazard. Meanwhile ,we must pay great attention to factors such as market restraint,strict supervision and so on to control moral hazard.