(Deposit Insurance Premium When Korean Financial Institutions Face Variable Default Time)

2008 ◽  
Author(s):  
Sung Wook Joh
Keyword(s):  
Financial Institutions ◽  
Deposit Insurance ◽  
Insurance Premium ◽  
Default Time

scholarly journals Fair premium rate of the deposit insurance system based on banks’ creditworthiness

2019 ◽  
Vol 36 (1) ◽  
pp. 8-31 ◽  
Author(s):  
Naoyuki Yoshino ◽  
Farhad Taghizadeh-Hesary ◽  
Farhad Nili
Keyword(s):  
Financial Institutions ◽  
Deposit Insurance ◽  
Credit Rating ◽  
Financial System ◽  
Insurance Premium ◽  
Capital Adequacy ◽  
Rate System ◽  
Content Type ◽  
Premium Rate ◽  
Fair Premium

Purpose Deposit insurance is a key element in modern banking, as it guarantees the financial safety of deposits at depository financial institutions. It is necessary to have at least a dual fair premium rate system based on creditworthiness of financial institutions, as considering singular premium system for all banks will have moral hazard. This paper aims to develop theoretical and empirical model for calculating dual fair premium rates. Design/methodology/approach The definition of a fair premium rate in this paper is a rate that covers the operational expenditures of the deposit insuring organization, provides it with sufficient funds to enable it to pay a certain percentage share of deposit amounts to depositors in case of bank default and provides it with sufficient funds as precautionary reserves. To identify and classify healthier and more stable banks, the authors use credit rating methods that use two major dimensional reduction techniques. For forecasting nonperforming loans (NPLs), the authors develop a model that can capture both macro shocks and idiosyncratic shocks to financial institutions in a vector error correction model. Findings The response of NPLs/loans to macro shocks and idiosyncratic innovations shows that using a model with macro variables only is insufficient, as it is possible that under favorable economic conditions, some banks show negative performance due to bank level reasons such as mismanagement or vice versa. The final results show that deposit insurance premium rate needs to be vary based on banks’ creditworthiness. Originality/value The results provide interesting insight for financial authorities to set fair deposit insurance premium rate. A high premium rate reduces the capital adequacy of individual financial institutions, which endangers the stability of the financial system; a low premium rate will reduce the security of the financial system.

Credit risk and the deposit insurance premium: a note

2001 ◽  
Vol 53 (5) ◽  
pp. 497-508 ◽  
Author(s):  
Jean Dermine ◽  
Fatma Lajeri
Keyword(s):  
Credit Risk ◽  
Deposit Insurance ◽  
Insurance Premium

scholarly journals SISTEM PENJAMINAN SIMPANAN (DEPOSIT INSURANCE SYSTEM) PADA INDUSTRI PERBANKAN INDONESIA

2019 ◽  
Vol 1 (2) ◽  
pp. 77-90
Author(s):  
Sjafruddin Sjafruddin
Keyword(s):  
Deposit Insurance ◽  
Insurance Premium ◽  
Bank Risk ◽  
Contagion Effect ◽  
Insurance System ◽  
Guarantee System ◽  
Deposit Insurance System ◽  
The Government ◽  
Public Costs ◽  
The Impact

Banking plays a very important role in the economy along with its function to channel funds from parties who have excess funds (surplus of funds) to those who need funds (lack of funds). If the banking industry does not work well, the economy will become inefficient and the expected economic growth will not be achieved. The risks that are always inherent in the financial and banking sectors, can trigger a crisis at any time and result in a collapse of the country's economy. To overcome the impact of the crisis, the government must pay quite large public costs. This article analyzes several important concepts, namely bank risk and the contagion effect, the operation of a deposit guarantee system that has been implemented in various countries after a financial crisis and how the deposit guarantee program is implemented in Indonesia. The results show that the Deposit Insurance System (DIS) can be implemented through law enforcement system, market discipline, political and economic freedom, low levels of corruption, strict regulations inbanking sector, setting an adequate deposit insurance premium based on the level of bank risk , and selective deposit guarantees. Keywords: Deposit Insurance System,Indonesia Deposit Insurance Corporation, Risk   Abstrak Perbankan memegang peran yang sangat penting dalan perekonoman seiring dengan fungsinya untuk menyalurkan dana dari pihak yang mempunyai kelebihan dana (surplus of funds) kepada pihak-pihak yang membutuhkan dana (lack of funds). Apabila industri perbankan tidak bekerja dengan baik, maka perekonomian menjadi tidak efisien dan pertumbuhan ekonomi yang diharapkan tidak akan tercapai. Risiko yang selalu melekat dalam sektor keuangan dan perbankan, dapat memicu terjadinya krisis sewaktu-waktu dan berakibat lumpuhnya ekonomi negara. Untuk menanggulangi dampak krisis tersebut, pemerintah harus mengeluarkan biaya publik cukup besar. Artikel ini menganalisis beberapa konsep penting, yaitu risiko bank dan  efek penularan (Contagion Effect),penyelenggaraan sistem penjaminan simpanan yang telah di implementasikan berbagai negara setelah terjadi krisis keuangan dan bagaimana implementasi program penjaminan simpanan di Indonesia.Hasilnya menunjukkan bahwaDeposit Insurance System (DIS) dapat diimplementasikan melalui sistem penegakan hukum yang kuat, disiplin pasar, kebebasan politik dan ekonomi, tingkat korupsi yang rendah, regulasi khususnya di bidang perbankan yang kuat, penetapan premi penjaminan simpanan yang memadai dan berdasarkan tingkat risiko bank, serta pemberian jaminan simpanan yang selektif. Kata Kunci:Deposit Insurance System, Lembaga Penjamin Simpanan, Risiko

scholarly journals Market discipline and deposit insurance: evidence from some Middle Eastern banks

2008 ◽  
Vol 6 (1-2) ◽  
pp. 278-285 ◽  
Author(s):  
Ghassan Omet ◽  
Saif Ibrahim ◽  
Hadeel Yaseen
Keyword(s):  
Financial Institutions ◽  
Deposit Insurance ◽  
Middle Eastern ◽  
Banking Crises ◽  
Market Discipline ◽  
Financial Intermediaries ◽  
Basel Accord ◽  
Effective Governance ◽  
Time Period ◽  
Bank Disclosure

Financial intermediaries (banks) and market (stock markets) can play an important role in economic growth. They facilitate a more efficient mobilization of savings, spread risk, and provide liquidity. Given the high costs of banking crises, regulators have always sought the means that promote greater levels of prudence in the behaviour of banks. Indeed Pillar 3 of the Basel Accord relies on enhancing bank disclosure to strengthen market discipline. In other words, Basel II introduces mechanisms to ensure effective governance in financial institutions. The primary objectives of this research are to provide answers to two questions. First, do depositors discipline Jordanian, Kuwaiti, Omani, and Saudi banks? Second, the fact that the Kuwaiti and Saudi deposits are 100 percent insured explicitly and implicitly respectively, while the Jordanian and Omani deposits are insured up to $14,000 and $50,000 respectively, does this difference in the deposit insurance design have any bearing on market discipline. Based on a sample of listed Jordanian, Kuwaiti, Omani, and Saudi banks during the time period 1997 – 2006, the overall results clearly indicate the absence of market discipline in Kuwait, Oman, and Saudi Arabia. In other words, market discipline is at work only in Jordan.

Macroprudential Regulation of Banks and Financial Institutions

2019 ◽  
pp. 527-548
Author(s):  
Gerald P. Dwyer
Keyword(s):  
Financial Institutions ◽  
Financial Crises ◽  
Deposit Insurance ◽  
Living Wills ◽  
Major Topic ◽  
Equilibrium Behavior ◽  
Macroprudential Regulation ◽  
Financial Firms ◽  
Real Gdp ◽  
Bail Out

Regulation of financial institutions to avoid the worst effects of financial crises has become a major topic of research and a focus of regulators’ efforts. Policies designed to reduce crises’ effects on real GDP and employment are called macroprudential. Moral hazard has been introduced by deposit insurance and bailouts of banks and large financial institutions. Too little is known to premise macroprudential regulation on externalities. That said, higher capital at banks and other institutions counteracts one effect of deposit insurance and would make the financial system more resilient. Living wills are likely not to be time-consistent. Regulators will not have an incentive to use them in a financial crisis. Instead, they will bail out firms to avoid adverse effects on the economy. Institutions determining regulators’ choices in a crisis need to be designed to make it equilibrium behavior for regulators to let financial firms fail.

Sign in / Sign up

Export Citation Format

Share Document