Deposit Insurance System China Necessity

my country's financial industry is in the process of transforming into marketization, and depository institutions are objectively facing higher risks. The establishment of a deposit insurance system in our country at this stage is not only a need for the banking industry to improve the security system, but also a need to reduce the cost pressure of the government and the central bank to exit the market. It is also a need for the opening up of the financial industry.

With the final realization of the marketization process of commercial banks, the implicit guarantee role of national credit will gradually weaken. Especially starting from this year, my country's financial reform will be fully accelerated: the marketization of interest rates and exchange rates will gradually advance. , large state-owned commercial banks are about to be restructured and listed, and the reform of small and medium-sized commercial banks also requires a good entry and exit mechanism. It will be difficult to avoid financial risks if these reforms are carried out. Therefore, the deposit insurance system is an important condition for ensuring the smooth progress of my country's financial system reform. Without a deposit insurance system, the next step of reform measures in the banking industry will lack safety guarantees.

1. Definition and form of deposit insurance system

The so-called deposit insurance system is a system established by a country through legal form in order to protect the interests of depositors and maintain the stability of financial order. A system for repaying debts when a bank goes bankrupt due to an accident. To put it simply, each depository financial institution pays premiums. Once the insured institution faces crisis or bankruptcy, the insurance institution will pay a certain limit of deposits for depositors.

There are three main forms of deposit insurance systems: one is a deposit insurance institution established by the government, such as the United States and the United Kingdom; the other is an insurance institution established by the private sector in the form of an association, such as Germany, France and Italy; the third type is deposit insurance institutions jointly established by official and private institutions, such as Japan and Belgium. Although deposit insurance institutions in various countries have different organizational forms, their purposes are basically the same, and they all also undertake financial supervision functions. There are two forms of deposit insurance, namely mandatory and voluntary. The former means that all depository financial institutions are forced to become members of the Deposit Insurance Corporation; the latter allows financial institutions to choose whether to insure.

The relevant research group of the People's Bank of China recently conducted a comparative study on the deposit insurance systems of various countries. The research results show that although there are large differences in the deposit insurance systems of various countries, the basic goals are the same, namely: first, to protect deposits. The second is to establish reasonable procedures for dealing with banks that have serious problems and are on the verge of bankruptcy; the third is to improve public confidence in banks and ensure the stability of the banking system.

2. Constructing my country’s deposit insurance system

Deposit insurance does play an important role in building depositor confidence and maintaining the stability of the financial system, but it is also a A "double-edged sword", an imperfectly designed deposit insurance system may lead to a deterioration in the operating conditions of the financial industry. Therefore, to build a good deposit insurance system, we must learn from each other's strengths and make up for our weaknesses based on our country's actual conditions and foreign experiences and models. First, the design of my country's deposit insurance institutions should reflect the principles of mandatory participation, fee-rate linkage, and risk guarantees; second, bank supervision must be strengthened, including market access, business scope, information disclosure, risk management, and internal control, as well as Conduct continuous supervision such as market exit; finally, market discipline must be strengthened. By strengthening the supervision of banks by bank shareholders, depositors, other creditors, and the public, moral hazard can be reduced. At the same time, effective market discipline must be strongly supported by a robust accounting system and a strict information disclosure system.

1. Scope of deposit insurance and insurance methods. There are five main categories of depository institutions in my country: state-owned commercial banks, non-state-owned commercial banks, urban and rural credit cooperatives, Chinese branches of foreign banks, and postal savings bureaus. Deposit insurance is to prevent systemic risks in the financial system, and the principle of compulsory insurance should be implemented. The reasons are as follows: on the one hand, bank risks are inevitable, and correspondingly, residents and financial institutions have weak risk awareness; on the other hand, if voluntary insurance is adopted, state-owned commercial banks, which currently dominate the financial system, rely on their special Due to their status and competitive advantages, they may not participate in insurance in order to reduce operating costs, resulting in a gap in the financial safety net.

Therefore, our country should implement the principle of compulsory insurance to enhance the risk resistance of the entire system. As the risk awareness of residents and financial institutions increases, the deposit insurance system is increasingly improved, and it can gradually transition to a voluntary insurance method and establish an access system for deposit insurance.

2. Objects of deposit insurance. The object of deposit insurance is the subject matter of the insurance contract. The deposit insurance system should insure residents' local and foreign currency deposits other than inter-bank lending. In order to adapt to the requirements of financial opening up, foreign currency savings deposits in China can also be used as deposit insurance objects. This protects the interests of Chinese residents and improves China's international financial reputation for foreign residents.

3. The insurance premium rate of deposit insurance is determined. From an international perspective, there are generally two types of deposit insurance rates: one is a single insurance rate, that is, the insurance premium is collected based on the deposit balance of each bank multiplied by a unified insurance rate; the other is a differential insurance rate determined based on risk. That is, the insurance rate is first determined based on each bank's capital and other supervisory indicators, and then multiplied by each bank's deposit balance. Compared with the two systems, the latter not only embodies the basic principles of insurance, but also inhibits banks' incentives to engage in high-risk credit. Banks with low capital adequacy ratios or a large number of high-risk assets will be considered high-risk banks and will have to pay higher insurance premiums than ordinary banks, thereby increasing their operating costs. More importantly, insurance rates are constantly adjusted with changes in indicators such as bank capital adequacy ratios, which is conducive to encouraging banks to hold more capital and fewer high-risk assets. Since the risk levels, operation and management levels, asset scale and asset quality of various depository institutions in my country are quite different, a differential premium rate system can be considered to adopt different insurance premium rates for institutions with different risks. Different types of depository institutions have certain differences in insurance rates due to different risks. Institutions of the same type bear different insurance rates due to different risk index values. In specific operations, different benchmark insurance rates can be determined based on the overall evaluation of the risks of various types of institutions, and then through the overall measurement of the risk indicator value of each institution, necessary adjustments can be made to the insurance rates of individual institutions that exceed the category risk indicators. of floating.

4. The establishment of deposit insurance institutions. A more realistic option is for the government and deposit-taking financial institutions to jointly fund the establishment of a deposit insurance company. The company will accept the direct leadership of the People's Bank of China. This will enhance the government and insured financial institutions' sense of responsibility for maintaining the security of the financial system. , improve the strength and credibility of deposit insurance institutions, and further improve the central bank's financial supervision methods and strengthen its macro-financial control capabilities.

5. Deposit insurance limit. The deposit insurance company shall determine a maximum insurance amount for deposit accounts. If the maximum insurance amount is too low, once the bank fails, it will cause great losses to depositors and reduce depositors' confidence in deposits, which will reduce the source of bank credit funds; if the maximum insurance amount is too high, it will cause depositors to become dependent. , thinking that even if the bank fails, they will not suffer losses, so they choose the deposit bank carelessly. The basic points for reasonably determining the maximum amount of deposit insurance are: first, to protect the interests of the vast majority of depositors to the maximum extent; second, to ensure that the liquidation work after bank bankruptcy can be carried out realistically. Based on the current income status and currency usage preferences of our country's residents, the maximum amount of deposit insurance in our country should be set at 100,000 yuan. Full compensation will be provided for deposits within 100,000 yuan (including 100,000 yuan), and a certain amount will be given for deposits exceeding 100,000 yuan. Reducing rate compensation.

6. Deposit insurance claims. When an insured institution is unable to fulfill its payment obligations due to voluntary dissolution or closure announced by the regulatory authority, the deposit insurance institution needs to pay compensation for deposits. The meaning of compensation is not limited to the payment of cash, but more importantly, it is the recognition of the depositor's right to pay cash. Therefore, the deposit insurance company can choose different compensation methods: First, based on the account records of the closed institution and the deposit balance certificate submitted by the depositor, The income is directly calculated according to the insured amount and then paid in cash; the second is that the deposit insurance company will come forward to transfer the depositors' deposits to other bank accounts in the same area; the third is to continue operating in the name of the deposit insurance company.

When determining insurance compensation standards, we should take into account the fact that bank deposits dominate the financial asset structure of China's urban and rural residents and small and medium-sized enterprises, and implement the compensation principles of "guaranteed", "decreasing" and "capping". "Guarantee" means that if the sum of various deposit claims of the same depositor in the failed institution (hereinafter referred to as deposit claims) is less than or equal to the statutory amount, full compensation will be paid. "Decreasing" means that if the deposit claims exceed the statutory amount, compensation will be paid in an appropriate proportion. The “cap” is the statutory maximum compensation amount for the same deposit claim in the same liquidation. Adopting a "guaranteed", "decreasing" and "capping" compensation model will help prevent large-amount depositors from being in a better position than small-amount depositors. At the same time, it will reduce the degree of moral hazard for depositors and encourage depositors to proactively care about the depository bank in advance. security.

Conclusion

Although the deposit insurance system can reduce and prevent risks, it still has flaws. While continuously strengthening financial supervision by the Central Bank and the China Banking Regulatory Commission, an industry self-discipline system for financial institutions should be established as soon as possible to improve their self-discipline.

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