Study on Deposit Insurance Coverage Limit for Bank Risk-taking Minimization

Abstract

Abstract:

From the perspective of minimizing bank risk-taking, this paper studies the determination of explicit deposit insurance coverage limits. The results show that there is a U-shaped relationship between bank risk-taking and coverage limit and the relationship will be more pronounced in countries with higher household saving rate or lower interest spreads. Further analysis shows that the bank risk-taking is higher when the deviation between actual coverage limits and bank risk-minimizing ones is higher. China has a RMB 500,000 limit which is higher than the RMB 290,000 limit that the model predicts and is bad for the bank risk-taking.

Key words: coverage limit, bank risk-taking, household saving rate, interest spreads

Zhao Shangmei, Liu Na, He Jiang, Chang Yiming. Study on Deposit Insurance Coverage Limit for Bank Risk-taking Minimization[J]. , 2017, 29(10): 9-20.

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