Optimal Interest Margin, Deposit Insurance Premium and Bank Size

2002 ◽  
Author(s):  
Suheyla Ozyildirim
Keyword(s):  
Deposit Insurance ◽  
Insurance Premium ◽  
Margin Deposit ◽  
Interest Margin

Political connections, government capital injection, and deposit insurance premium

2019 ◽  
Vol 15 (1) ◽  
pp. 2-18
Author(s):  
Jyh-Horng Lin ◽  
Shi Chen ◽  
Fu-Wei Huang
Keyword(s):  
Deposit Insurance ◽  
Insurance Premium ◽  
Bank Loans ◽  
The Political ◽  
Political Connection ◽  
Barrier Option ◽  
Content Type ◽  
Capital Injection ◽  
Capital Injections ◽  
Interest Margin

PurposeThe purpose of this paper is to develop a capped barrier option framework to consider the politically preferential treatment for bank loans incentivized by government capital injections and calculate loan-risk sensitive insurance premiums.Design/methodology/approachThis paper takes a capped barrier option approach to the market valuation of the equity of the bank and the liability of the deposit insurer. The cap demonstrates the dynamics of a politically connected borrowing firm’s asset and highlights the truncated nature of loan payoffs. The barrier addresses that default can occur at any time before the maturity date. The bank participating in a government capital injection program is required to fund the politically connected firm that has preferential access to financing.FindingsPolitical connection as such makes the bank more prone to risk taking at a reduced interest margin, produces greater safety for the bank owing to government capital injections, and leads to increasing the fair deposit insurance premium. The positive effect of political connection on the deposit insurance premium, which ignores the cap and the barrier yields significant over-estimation.Originality/valueThe study on the politically connected borrowing firm shows that political connection is likely to affect the distressed bank’s performance, yielding the political-connection cost of a reduced bank interest margin and the political-connection benefit of a reduced bank equity risk, contributing the literature on political connection and bank bailout.

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

Optimal Bank Interest Margin with Synergy Banking under Capital Regulation and Deposit Insurance: A Swaption Approach

2011 ◽  
Vol 14 (02) ◽  
pp. 327-346 ◽  
Author(s):  
Chuen-Ping Chang ◽  
Jyh-Horng Lin
Keyword(s):  
Mutual Fund ◽  
Opportunity Cost ◽  
Deposit Insurance ◽  
Retail Banking ◽  
Capital Regulation ◽  
Call Option ◽  
Risky Assets ◽  
Bank Equity ◽  
Model Bank ◽  
Interest Margin

The main purpose of this paper is to model bank spread behavior under capital regulation and deposit insurance. Comparative static results show that an increase in the capital-to-deposits ratio or the deposit insurance decreases the bank's interest margin or spread. It is also shown that an increase in the equity that implies its opportunity cost of the coupon rate on the fixed leg decreases the margin. Previous research on market-based evaluations of bank equity has modeled the bank as a narrowing banking firm with risky assets and insured liabilities. The equity of the bank is viewed as a call option on its risky assets. No attempt was made to explicitly analyze a synergy between lending and deposit-taking, and, in our view, the equity of the bank is viewed as a swap option on coupon bonds. Synergy banking, particularly in the return to retail banking, is important in distinguishing banks from other lenders such as finance companies and mutual fund institutions. These other lenders call for the breaking up of banks into separate lending and deposit-taking operations, respectively. Our findings provide an insight for synergy banking operations concerning regulated bank spread behavior in the return to retail banking.

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

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