Whether The Effect Of Deposit Insurance System On Banking Systemic Risk Is Immutable?

Deposit Insurance System,a major part of Financial Safety Net,is a typical mechanism to protect the interests of depositors and maintain the stability of financial systems.However,as experience around the world has shown,Deposit Insurance provokes commercial banks' risky behaviors,which brings moral hazard and vulnerability to banking system.Based on scholars' different findings on the opposite effects of Deposit insurance,this paper tries to find how Deposit Insurance System affects banks' systemic risk in the short term and in the long term.Recently,it arises that public concern over systemic risk from the financial reformation and the new normal of economy in China.Also,China established Deposit Insurance System in 2015.This paper focuses on these.This paper comes to four conclusions after analyzing the data from 817 commercial banks in 52 countries during 2000 to 2013,using panel OLS,Heckman two-step and U-test.And here are the conclusions.Firstly,the systemic risk of commercial banks will rise after the introduction of Deposit Insurance System.Secondly,the introduction of Deposit Insurance System will raise banking systemic risk in the short term but decrease that in the long term.Thirdly,there is a Ushape relationship between coverage limit and systemic risk.Fourthly,after the establishment of Deposit Insurance System,the commercial banks in bank-based countries suffer more systemic risk than those in market-based countries.Considering the conclusions mentioned above,the government is supposed to promote financial reform,enhance macro prudence,strengthen micro regulation and raise public awareness.In addition,it is important for the government to consider the positive effect of Deposit Insurance System and its negative effect,its short-term effect and its long-term effect and the financial structure.Furthermore,it is better for China to raise the coverage limit in an appropriate time to reach the optimum coverage limit.