A system in which deposit insurance institutions provide financial assistance to member institutions or directly pay part or all of their deposits to depositors when their member institutions are in business crisis or face bankruptcy, thus protecting depositors' interests, maintaining bank credit and stabilizing financial order.
The deposit insurance system can improve the stability of the financial system, protect the interests of depositors, and promote moderate competition in the banking industry. However, it also has its own costs, which may induce moral hazard, make banks take more risks, and also cause the problem of adverse selection.
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Organizational form:
Financial risks plague commercial banks in China.
From the perspective of countries that implement this system, there are mainly three organizational forms.
Financial risks plague commercial banks in China.
1, established by governments, such as the United States, Britain and Canada.
2. Established by the government and banking departments, such as Japan, Belgium and the Netherlands.
3. It was jointly established by banks with the support of the government, such as Germany.
China has not yet established this system, but financial risks are plaguing commercial banks in China, the interests of depositors are being threatened, and the credibility of banks is being challenged.
Therefore, while improving the supervision level of the central bank, it is very important to establish a deposit insurance system in China, especially for deposits absorbed by small and medium-sized financial institutions, to protect the interests of depositors in families and small and medium-sized enterprises, to stabilize the financial system, and to enhance depositors' confidence in banks.
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