The Functional Orientation And System Construction Of China’s Deposit Insurance System

Financial Safety Nets contain Bank supervision System, Lender of Last ResortSystem, Deposit Insurance System. These three systems are what a perfect FinancialSafety Net must have. Our country only have the Bank supervision System andLender of Last Resort System now, we haven’t yet build up the Deposit InsuranceSystem. In the early1930s, the developed countries of the west did some initialattempt in building up Deposit Insurance System.The objectives of these countrieswere to steady financial order and protect the interest of the depositor.In1933,theUnited States founded the federal deposit insurance corporation to act as the protectorof deposit. Since the creation of the Deposit Insurance System, it had experiencedmany financial crises during the past70years and finally turned out to be useful. Somany other countries and regions began to build up their own Deposit InsuranceSystem. There were111countries who had built up Deposit Insurance System by2013. To go with the tide of the world, China should build up our own DepositInsurance System.In the first part of this paper, the author mainly talked about the functionalorientation of China’s Deposit Insurance System. First, the author had a descriptionabout the general functions of Deposit Insurance System and made an induction aboutthe most famous function patterns. There are three kinds of patterns: Paybox,Least-cost, Risk-minimising. Second, the author chose some countries to have ananalysis, America chose the Risk-minimising pattern, England and India were therepresentatives of Paybox pattern, Japan used the Least-cost pattern. At last, theauthor described the necessity to build up Deposit Insurance System and our choiceabout function orientation. The Reserve against Deposit System of China had somedefects, and the interest rate liberalization demanded us to have our own DepositInsurance System. Finally, the author thought that we should choose the Least-costpattern.The second part of this paper had a discussion about the construction of deposit insurer. First, our government should fund to build up this institution. Second, thedeposit insurer should make a good relationship with other subjects in this system,including the relationship with depositor, insurance financial institutions, Bank ofChina, China Banking Regulatory Commission. At last, the author talked about thesubrogation right of deposit insurer, for the further development of this system, weshould give the right to it.The third part of this paper was mainly about the construction of this system,including the insurance institution, premium rate and insurance subject. First, weshould use territorial jurisdiction to make sure about the scope of the insuranceinstitution; and the way to join in this system should be mandatory. Second, weshould use flat rate to calculate the insurance expenses. Third, the author mainlytalked about the insurance subject, including the range of insurance subject, the levelof protection, the ways to compensate. The insurance subject of China should containcurrent deposit and time deposit, and the deposit of company should also becontained. As for the level of protection, we could set a quota. Finally, the ways tocompensate could be flexible, cash or deposit transfer. The method is from general tospecific, we don’t just study other’s successful experience, we must choose the mostsuitable system for our country combined with the situation of financial markets.