scholarly journals Measurement of Systemic Risk in a Common European Union Risk-Based Deposit Insurance System: Formal Necessity or Value-Adding Process?

Risks ◽  
2018 ◽  
Vol 6 (4) ◽  
pp. 137 ◽  
Author(s):  
Aida Barkauskaite ◽  
Ausrine Lakstutiene ◽  
Justyna Witkowska
Keyword(s):  
European Union ◽  
Systemic Risk ◽  
Deposit Insurance ◽  
Current System ◽  
Banking System ◽  
Risk Indicators ◽  
Insurance Fund ◽  
Insurance System ◽  
Deposit Insurance System ◽  
The Stability

Scientific discussions have emphasized that the main problem with the current deposit insurance system is that the current system does not evaluate the risks that banks assume to calculate the deposit insurance premiums in many countries of the European Union (E.U.). Thus, the prevailing system does not safeguard a sufficient level of stability in the banking system. Scientific studies show that the deposit insurance system should consider not only the risk indicators for individual banks, but it must also consider the systemic risk of banks that affects the stability of the banking system. Hence, the question arises as to whether measurements of systemic risk in a common E.U. risk-based deposit insurance system are a formal necessity or if they are a value-adding process. Expanding the discussion of scientists, this article analyzes how contributions to insurance funds would change the banks of Lithuania following the introduction of the E.U.’s overall risk-based deposit insurance system and after taking into consideration the additional systemic risk. The research results that were obtained provide evidence that the introduction of a risk-based deposit insurance system would redistribute payments to the deposit insurance fund between banks operating in Lithuania, and, thereby, would contribute to a reduction in the negative effects of the deposit insurance system and would improve the stability in the financial system.

scholarly journals Sources Of Non-Performing Loans In Turkish Banking System

2011 ◽  
Vol 5 (10) ◽  
Author(s):  
Gokhan Karabulut ◽  
Mehmet Huseyin Bilgin
Keyword(s):  
Financial Stability ◽  
Deposit Insurance ◽  
Developing Economies ◽  
Banking System ◽  
Bank Loans ◽  
System Stability ◽  
Insurance System ◽  
Turkish Government ◽  
Deposit Insurance System ◽  
The Impact

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: Times New Roman; font-size: x-small;">The purpose of this paper is to examine the impact of the unlimited deposit insurance on non-performing loans and market discipline. Deposit insurance program play a crucial role in achieving financial stability. Governments in many advanced and developing economies established deposit insurance schemes for reducing the risk of systemic failure of banks. Deposit insurance has a beneficial effect of reducing the probability of a bank run.<span style="mso-spacerun: yes;">&nbsp; </span>However deposit insurance systems have its own set of problems. Deposit insurance systems create moral hazard incentives that encourage banks to take excessive risk. Turkey established an explicit deposit insurance system in 1960. Until 1994, the coverage determined by a flat rate but in that date, Turkey experienced a major economic crisis. In April 1994, Turkish government started to apply an unlimited deposit insurance scheme to restore banking system stability. Unlimited deposit insurance caused a remarkable increase at non-performing loans. This paper empirically estimates the impact of unlimited deposit insurance system on non-performing bank loans (NPLs) and analyses the other potential sources of NPLs. </span></p>

scholarly journals The determinants of conventional banks profitability in developing and underdeveloped OIC countries

2019 ◽  
Vol 24 (47) ◽  
pp. 4-28 ◽  
Author(s):  
Ahmad Al-Harbi
Keyword(s):  
Deposit Insurance ◽  
Banking System ◽  
Ordinary Least Squares ◽  
Policy Implications ◽  
Data Set ◽  
Content Type ◽  
Pure Sample ◽  
Insurance System ◽  
Deposit Insurance System ◽  
Conventional Banks

Purpose The purpose of this study is to investigate the effect of internal and external variables on the profitability of conventional banks operating on developing and underdeveloped countries, the Organization of Islamic Cooperation (OIC) states. Design/methodology/approach In this paper, the author uses ordinary least squares fixed-effects model on an unbalanced panel data set of all conventional banks operating in OIC countries (52 countries included from 57) over the period 1989-2008, 686 banks. Findings The results suggest that equity, foreign ownership, off-balance sheet (OBS) activities, real gross domestic product growth, real interest rate and concentration foster banks’ profitability. In addition, the results showed that the banking sector development and loans will increase banks’ profitability in the long run in the countries of the studies. In contrast, the study reported that deposits lower profitability. The study also revealed that GDP per capita, market capitalization and banks size have no impact on profitability. Practical implications The findings of this study have considerable policy implications. First, policymakers need to regulate nontraditional activities to avoid any financial crisis because banks in OIC countries are heavily engaged in nontraditional activities to boost its profit. Second, policymakers are advised to improve the deposit insurance system to insure the stability of the financial system as well as improving banks’ profitability. Third, policymakers need to improve the efficiency of the stock market, maintain small banking system and encourage foreign investments in the banking system. Originality/value The paper adds to the literature on the commercial bank’s profitability determinants. In particular, such study has not been conducted on OIC countries, and the study included all mainstream banks and incorporated the effect of deposit insurance system so far. Also, pure sample of conventional banks used as many conventional banks in OIC countries have Islamic windows or offer Islamic products. In addition, this study investigated the effect of OBS activities on net interest margin (NIM) because the studies that explored this interrelationship are limited especially for developing and under developed countries. The results showed that OBS activities contributed significantly and positively to return on assets and NIM. Moreover, this paper used a pure sample of conventional banks to avoid any biasness; see data section. Moreover, this study gives an idea about the economic situation and financial conditions of OIC countries during the period of the study.

scholarly journals Perspectives of the financial stability protection and banking risk prevention

2021 ◽  
Vol 14 (3) ◽  
pp. 109-126
Author(s):  
Miroslav Čavlin ◽  
Jelena Vapa-Tankosić ◽  
Srđan Egić
Keyword(s):  
Financial Stability ◽  
Deposit Insurance ◽  
Financial System ◽  
Risk Prevention ◽  
Financial Security ◽  
Insurance System ◽  
Deposit Insurance System ◽  
The Republic ◽  
The Stability ◽  
Security Network

The deposit insurance system is the backbone of the protective mechanism of the financial security network, which enables the prevention of a "stampede" of depositors on banks in order to prevent a negative effect on the stability of the financial system. Therefore, especially in the event of a crisis, such as the pandemic caused by COVID-19, the protection of financial stability and depositors emphasizes the importance and role of efficient organization of the deposit insurance system. The paper starts from the analysis of the concept of a financial security network in order to create a relevant basis for modeling the directions of development of the system of financial stability protection and risk prevention of banking operations. The aim of the paper is to conduct a research into the theoretical and empirical findings in order to identify the potential for a more effective deposit insurance system in the Republic of Serbia. An efficient deposit insurance system in the Republic of Serbia should provide support and protection for depositors, most of whom do not possess the necessary knowledge which can help them assess banking risks, i.e. risks of financial failure and crisis. The development of our deposit insurance system should be aimed at strengthening the stability of the financial system and banking operations, i.e. its resilience to crisis disturbances on the market.

scholarly journals TATA KELOLA SISTEM PENJAMINAN SIMPANAN PERBANKAN DI INDONESIA

2020 ◽  
Vol 2 (2) ◽  
pp. 113-125
Author(s):  
Sjafruddin Sjafruddin ◽  
Iskandar Iskandar
Keyword(s):  
Interest Rate ◽  
Moral Hazard ◽  
Risk Taking ◽  
Deposit Insurance ◽  
Banking System ◽  
Public Confidence ◽  
Insurance System ◽  
Deposit Insurance System ◽  
Governance Process ◽  
The Government

The ratification of Law Number 24 of 2004 concerning the Deposit Insurance Corporation (LPS) marks the formal process of institutionalizing the deposit insurance system in Indonesian banking. After the banking systemic crisis in 1997 that hit various countries including Indonesia, the government made various stabilization and reform policies in the financial sector to improve the banking system. The blanket guarantee policy for bank customer deposits in 1998 with no limits (blanket guarantee) restored public confidence in banks, but on the other hand this guarantee also created a moral hazard risk for banks. The existence of the LPS ended the unlimited deposit insurance system by limiting the guarantee in the form of a deposit insurance limit and a guaranteed interest rate known as the LPS interest rate. This article attempts to describe and analyze the institutionalization process and governance process in the deposit insurance system in Indonesia. The results show that the process of institutionalizing the deposit insurance system in Indonesia is carried out in stages by assessing banking risk taking and public perceptions of the banking industry in Indonesia. In the governance process, the LPS carries out its function as guarantor of deposits of depositors, LPS is tasked with determining and formulating policies for implementing deposit insurance and implementing deposit insurance. LPS makes payment of guarantee claims to depositors from banks whose business licenses have been revoked as long as they meet the requirements stipulated by the LPS Law.   Keywords: Deposit Insurance Agency, Institutionalization, Governance.     Abstrak Lahirnya Undang-Undang Nomor 24 Tahun 2004 tentang Lembaga Penjamin Simpanan (LPS) menandai proses formal institusionalisasi sistem penjaminan simpanan pada perbankan di Indonesia. Setelah Krisis sistemik perbankan tahun 1997 yang melanda berbagai negara termasuk Indonesia, pemerintah membuat berbagai kebijakan stabilisasi dan reformasi di sektor keuangan guna menyehatkan sistem perbankan. Kebiijakan penjaminan terhadap jumlah simpanan nasabah perbankan pada tahun 1998 dengan tanpa batasan (blanket guarantee) mengembalikan kepercayaan masyarakat terhadap perbankan, namun disisi lain jaminan tersebut juga menimbulkan risiko moral hazard bagi perbankan. Keberadaan LPS mengakhiri sistem penjaminan simpanan tanpa batas dengan membatasi penjaminan dalam bentuk limit penjaminan simpanan dan suku bunga yang dijamin yang dikenal dengan suku bunga LPS. Artikel ini mencoba memaparkan dan menganlisa proses institusionalisasi dan proses tata kelola (governance) pada sistem penjaminan simpanan di Indonesia. Hasilnya menunjukkan bahwa proses institusionalisasi sistem penjaminan simpanan di Indonesia dilakukan secara bertahap dengan menilai risk taking perbankan dan persepsi masyarakat terhadap industri perbankan di Indonesia. Dalam proses tata kelola, LPS menjalankan fungsinya sebagai penjamin simpanan deposan, LPS bertugas menetapkan dan merumuskan kebijakan pelaksanaan penjaminan simpanan serta melaksanakan penjaminan simpanan. LPS melakukan pembayaran klaim penjaminan kepada deposan dari bank yang dicabut izin usahanya sepanjang telah memenuhi persyaratan yang telah ditetapkan oleh UU LPS.   Kata kunci: Lembaga Penjamin Simpanan, Institusionalisasi, Tata Kelola.

scholarly journals Do Deposit Insurance Systems Promote Banking Stability?

2021 ◽  
Vol 9 (3) ◽  
pp. 52
Author(s):  
Nafis Alam ◽  
Ganesh Sivarajah ◽  
Muhammad Ishaq Bhatti
Keyword(s):  
Financial Stability ◽  
Deposit Insurance ◽  
Global Financial Crisis ◽  
Institutional Environment ◽  
Insurance Coverage ◽  
Banking System ◽  
Insurance System ◽  
Deposit Insurance System ◽  
Banking Stability ◽  
The Impact

During the global financial crisis (GFC), regulators and policymakers turned to deposit insurers, along with monetary and fiscal measures, to help restore market confidence and promote financial stability. These events have focused attention on the role of deposit insurers and their role in the banking system. Recent literature reveals that during the GFC, deposit insurance maintained banking stability and successfully prevented customers doing ‘runs’ on the banks. The objective of this paper is to examine the deposit insurance system’s coverage limits and the impact on banking stability, in the context of a jurisdiction’s economic and institutional environment. Our model examines 61 jurisdictions in Asia and Europe with explicit deposit insurance systems, covering the pre- and post-GFC period between 2004 and 2014. We also examine subsets to investigate the effects of the region by comparing Asia and Europe, as well as a subset using the date of establishment of the deposit insurance system to understand if maturity matters. The results indicate that deposit insurance systems, and specifically deposit insurance coverage levels, have both positive and negative effects on banking stability. We find significant associations with certain economic and institutional factors; however, there are differences between the models we ran. These can be ascribed to regional factors and the date of when a deposit insurance system was established.

scholarly journals Improving the System for Ensuring the Reliability of Savings Returns in the Russian Banking Sector

2020 ◽  
pp. 24-29
Author(s):  
Yelena Vladimirovna Travkina
Keyword(s):  
Trust Management ◽  
Deposit Insurance ◽  
Banking Sector ◽  
Insurance Fund ◽  
Insurance System ◽  
Deposit Insurance System ◽  
The World ◽  
Modern System ◽  
Banking Institution ◽  
Extension Of State

One of the most multifaceted and multidimensional socially significant categories in the development of the Russian savings system is its stability and relia-bility. In this regard, the study of ways to improve the system of guarantees of reliability of savings in the banking sector as one of the segments of the Russian savings system is an important tool in de-termining the directions of its further effective de-velopment. The paper assesses the main levels of implementation of the modern system of guarantees of the reliability of savings return in the banking sector, analyzes the world experience of building Deposit insurance systems, reveals the transfor-mation of insurance compensation in the historical perspective and methods of deducting contribu-tions to the Deposit insurance Fund. The directions of improving the efficiency of the Deposit insurance system are highlighted, namely: the use of strict measures to detect criminal mechanisms in Deposit insurance, strengthening control by bank superviso-ry authorities and banks’ creditors, improving finan-cial literacy of the population, expanding the boundaries of the Deposit insurance system in the extension of state guarantees to entities and funds trust management. The author’s mechanism for im-plementing guarantees of reliability of savings re-turns in the subsystem of banking institution is proposed.

Sign in / Sign up

Export Citation Format

Share Document