Simulation Of Domestic Deposit Insurance Charge Rate

Since the 1990s, successive financial crises had been shaking the world economy for several times, causing many economic depressions, leading to serious lacks of investor confidence, inhibiting the consumer credit and corporate finance. Large-scale financial crisis are devastating, especially to the financial industry, which would impact the macroeconomic stability in a longer term. It can be said that the financial security has become a major issue that concerned by the entire world. Deposit insurance system, which can not only protect the interests of depositor, but also maintain the security of the financial system, has been established in more and more countries. However, improper pricing of deposit insurance may have some negative effects, such as moral hazard and adverse selection problems. Thus, reasonable pricing of deposit insurance can confine the high-risk business activities of banks, and promote the stable development of the financial system as well.This article firstly systemizes the deposit insurance concepts and theories in terms of the insurance approaches, forms and charge rates, in which the comparison between single rate system and differential rates system is mainly discussed.The development of the deposit insurance pricing model is introduced and discussed before the Ronn-Verma model and the expected loss pricing model are applied to simulation of 13 domestic listed banks' deposit insurance charge rate respectively. The capital injection amount of China Central Huijin commercial banks is adopted as the weighted coefficient to obtain the regulatory forbearance, because the specific bank data in China conforms to China's regulatory forbearance situation. Then the RV model results and the expected loss pricing model results were compared and concluded:the results of RV model pricing model is more accurate and realistic, so the proposed pricing of deposit insurance in China should consider the risk of banks and insurance rates and the banks having high risk should be responsible for high insurance rates, the banks having low risk should be responsible for low insurance rates. Then the insurance charge rates are introduced and compared from the view of both developing and developed countries, and the trend of insurance charge rate is concluded, providing references for the domestic deposit insurance pricing. At last, the policy recommendations for the content of the deposit and the construction of insurance system are provided.