Deposit Insurance: Actual and Good Practices

Author: Ms. G. G. Garcia

In most countries, banks are the most important financial institutions for intermediating between savers and borrowers, assessing risks, executing monetary policy, and providing payment services.

Volume/Issue: Volume 2000 Issue 001

Publication date: January 2000

ISBN: 9781557759481

$15.00

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Banks and Banking , Finance , Economics- Macroeconomics , OP , deposit , insurance system , deposit guarantee , guarantee , country , importance to the economy , lender-of-last-resort facilities , insurance agency , Deposit insurance , Commercial banks , Bank deposits , Systemic crises , Lender of last resort , Europe , Middle East , Asia and Pacific , Africa , Global

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Summary

This paper demonstrates a well-designed deposit guarantee system can strengthen incentives for owners, managers, depositors and other creditors, borrowers, regulators and supervisors, and politicians. Borrowers should be aware that they will have to repay their loans if their bank fails and will be encouraged to keep their loans current where offsetting is limited to past-due loans. The performance of insurers, regulators, and supervisors as agents will improve where they know that they can take justifiable actions without political interference and will be held accountable for their actions to their principals. Despite the improvements, and possibly partly because there are issues in deposit insurance design that remain to be resolved, financial crises have been prevalent during the 1990s. This situation has forced a number of countries to offer a blanket guarantee to restore confidence and to allow the continued functioning of the financial system while the authorities take time to design a plan for the resolution of the crisis.