scholarly journals Determination of Deposit Insurance Premium (LPS): Merton’s Option Theory with Co-Insurance Consideration

2021 ◽  
Vol 1 (2) ◽  
pp. 44-49
Author(s):  
Naomi Pandiangan
Keyword(s):  
Moral Hazard ◽  
Deposit Insurance ◽  
Insurance Premium ◽  
Deposit Insurance System ◽  
Black Scholes ◽  
Option Theory ◽  
Almost All ◽  
Excessive Risk Taking ◽  
Excessive Risk

Indonesia is a developing country that implements a deposit insurance system. Deposit Insurance Agency or LPS is an Indonesian deposit insurance established in 2004, which is Indonesian still unfamiliar with LPS, both among researchers, and the general public. Almost all deposit insurance in every country including Indonesia has the same problem, the problem is how to calculate premiums and how to avoid moral hazard by banks, therefore in this study will discuss how to determine premiums from the development of Black-Scholes option theory (1973) conducted by Merton (1977). To prevent banks from engaging in moral hazard, co-insurance is considered in this study, which is banks take the risk to anticipate 'excessive risk-taking' behavior. that occurs if the value of the asset is smaller than value of the deposit after joining the insurance program. So it is expected to encourage banks to beware.

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 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.

Effect of explicit deposit insurance premium on the moral hazard of banks’ risk-taking: Around the globe

2018 ◽  
Vol 05 (02) ◽  
pp. 1850012
Author(s):  
Raheel Mumtaz ◽  
Imran Abbas Jadoon
Keyword(s):  
Moral Hazard ◽  
Risk Taking ◽  
Deposit Insurance ◽  
Linear Models ◽  
Banking System ◽  
Insurance Premium ◽  
Empirical Estimation ◽  
Negative Effect ◽  
Small Banks ◽  
Selection Of

The adoption of explicit deposit insurance increases the moral hazard of banks’ risk-taking, caused by the decrease in depositors’ discipline. Based on the contract theory, this study probes whether the inception of risk-based deposit insurance premium may limit the moral hazard of banks’ risk-taking triggered by the deposit insurance. This study conducted the analysis on 2,196 banks of 125 countries, covered by the Bankscope database from 2002 to 2014 period. The hierarchical linear models (HLM) were used for empirical estimation of research models. The findings revealed that risk-based deposit insurance premium deteriorated the moral hazard of banks’ risk-taking, incited by the enactment of explicit deposit insurance, while this effect was high for the small banks. Therefore, the small banks were more stable and positively affected by the selection of risk-based deposit insurance premium as compared to the larger counterparts. However, it cannot eliminate this negative effect completely. Hence, the implementation of the premium structure by policymakers on the finding of this study encouraged the depositors and investors’ confidence in the banking system around the globe.

scholarly journals Determining Agricultural Premium Insurance in Malang City using Black Scholes Model

2021 ◽  
Vol 2 (2) ◽  
pp. 80-87
Author(s):  
Herlia Widi ◽  
Dea Nisa Rahma Lani ◽  
Faridatul Hasanah
Keyword(s):  
Secondary Data ◽  
Insurance Premium ◽  
Rice Production ◽  
Strongly Correlated ◽  
Literature Study ◽  
Agricultural Insurance ◽  
Black Scholes Model ◽  
Black Scholes ◽  
Premium Price

This study examines the determination of rainfall-based agricultural insurance premium prices using the Black-Scholes model. The Black-Scholes model was originally used to determine the price of European-type options. The research method used is a literature study with secondary data collection. The data used in this study are rainfall data and rice production results in the city of Malang from 2015 to 2020. Based on the results and discussion, rainfall which is strongly correlated with rice production results is in quarter 2. The premium results obtained are different according to the desired percentile. In addition to percentiles, taking R_0 also affects the premium price. When R_0=322, the premium price tends to be cheaper than R_0=271.

scholarly journals An Analytic Valuation of a Deposit Insurance

MATEMATIKA ◽  
2018 ◽  
Vol 34 (3) ◽  
pp. 115-128 ◽  
Author(s):  
Endah RM Putri ◽  
Venansius R Tjahjono ◽  
Daryono B Utomo
Keyword(s):  
Deposit Insurance ◽  
Insurance Premium ◽  
Transform Method ◽  
Put Option ◽  
Black Scholes Model ◽  
Interest Rate Volatility ◽  
Asset Value ◽  
Black Scholes ◽  
Option Model ◽  
Insurance Model

A deposit insurance is a measure to protect bank’s depositors fully or partly from the risk of losses caused by the banks failure to pay its debts when due. If the bank does not meet the payment since the asset value of the bank is less than debt, the guarantor will do the payment and take over the bank’s assets. The role of the guarantor is considered as a deposit insurance. Similar mechanism of the insurance to the European put option model, motivates the use of a Black-Scholes model in the valuation. The deposit insurance model is solved using a Fourier transform method analytically. Numerical results based on the solution confirms the results obtained by previous research. Also, some behaviours of the deposit insurance premium due to interest rate, volatility, and deposit-to-asset value ratio are presented.

Premium for implicit deposit insurance within Russian state banks

2021 ◽  
pp. 89-112
Author(s):  
H. I. Penikas
Keyword(s):  
Deposit Insurance ◽  
Insurance Premium ◽  
State Ownership ◽  
Insurance Pricing ◽  
Russian State ◽  
Deposit Insurance System ◽  
Private Banks ◽  
The Status ◽  
Set Up ◽  
Asset Size

Deposit insurance system (DIS) exists for 17 years in Russia. The major deposit market share belongs to state banks. Ordinary depositors may perceive the status of the bank state ownership to reflect additional deposit safety, even in the excess of the DIS limits. Such a situation is called an “implicit deposit insurance” in the literature. By offering a sort of implicit deposit insurance services state banks might underprice the deposits in excess of DIS limits compared to the private banks. We utilize data from the open sources to measure the scale of the implicit deposit insurance pricing in Russian state banks. We have revealed that Russian state banks pay extra premium all other things being equal. More specifically, the premium is larger in the smallest and the largest state banks, than in the medium-sized ones. Thus, we claim that the implicit insurance premium has a U-shaped form for Russian state banks depending on their asset size. However, Russian state banks underprice all deposits all other things being equal. Additionally, we find out that IRB banks in Russia are more prone to set up higher deposit rates when they take on more risks, than non-IRB banks.

Population Change, Modernization and Welfare. By Joseph Spengler. Prentice-Hall Inc., Englewood Cliffs, N.J. 1974.

1977 ◽  
Vol 16 (2) ◽  
pp. 220-222
Author(s):  
Zeba A. Sathar
Keyword(s):  
Population Growth ◽  
Population Change ◽  
Population Control ◽  
Stable Condition ◽  
Developed Countries ◽  
Wide Field ◽  
Wide Scale ◽  
Socio Economic Variables ◽  
Almost All

The book covers a wide field, touching on almost all aspects of popula¬tion change on a world-wide scale. It discusses, using world and country data, the relationships between demographic and socio-economic variables, and elaborates on" their relative importance in the determination of population problems which confront the world as a whole and nations individually. Policies designed to alleviate these problems are discussed with an emphasis on those related to population control. The first chapter is entitled "Population Growth: Past and Prospective" and reviews the various parameters associated with population change in the past and in the future. It touches upon the concept of a stable population in order to show the elements which cause a population to change (i.e. remove it from its stable condition). The main elements of change, population growth, migration, mortality and natality are discussed individually. The chapter is concluded by a description of the main differences in these elements and other socio-economic conditions as they exist in the less-developed and developed countries.

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