What is Deposit Insurance?

The deposit insurance system is a financial security system, which refers to the establishment of an insurance institution by gathering various eligible deposit-taking financial institutions. Each deposit institution, as an insurer, pays insurance premiums to it in accordance with a certain deposit ratio and establishes a deposit insurance reserve When a member institution encounters an operating crisis or faces bankruptcy, a deposit insurance institution provides financial assistance to it or pays part or all of its deposits directly to depositors, thereby protecting the interests of depositors, maintaining bank credit, and stabilizing financial order.

Deposit insurance

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Federal Deposit Insurance Corporation

At the end of the 19th century, the United States Congress began to discuss the topic of deposit insurance. Fourteen states in the United States established a deposit insurance system between 1829 and 1917.

In the 1930s, in order to save the banking system that was on the verge of collapse under the impact of the economic crisis, its Congress passed the "

The internationally accepted theory is to divide deposit insurance into explicit deposit insurance and implicit deposit insurance.

The explicit deposit insurance system refers to the state's explicit regulations on the establishment of the elements of deposit insurance and the disposal of problematic institutions in the form of laws.

The advantages of the explicit deposit insurance system are:

1. Define the depositor's compensation limit when the bank fails, and stabilize the depositor's confidence;

2. Establish professional institutions to deal with problematic banks quickly and effectively in a clear way, saving disposal costs;

3. Accumulate funds in advance to pay depositors and dispose of banks;

4. Strengthen the market constraints of the banking system and clarify the responsibilities of all parties in the event of a bank failure.

The hidden deposit insurance system is more common in the banking systems dominated by developing countries or state-owned banks. It means that the country does not make institutional arrangements for deposit insurance, but when the bank fails, the government will take some form of protection for the interests of depositors. , Thus forming public expectations for deposit protection. [19]

As of the end of 2013, China has not yet established a deposit insurance system, but in reality there is an implicit deposit insurance system, which guarantees the commercial behavior of deposit-type financial institutions with the credit of the state and the government. The hidden deposit insurance system is in line with China's consistent style of using administrative methods to regulate market issues and is determined by China's specific national conditions.

Remuneration and mutual aid

1.Protection

The Deposit Insurance Regulations have coordination issues with the legal relationship between bank corporate governance and depositor protection, with the financial regulatory legal system, with problematic bank processing and the legal system for the withdrawal of the banking market.

At 5 pm on November 27, 2014, the Legislative Affairs Office of the State Council promulgated the "Deposit Insurance Regulations (Consultation Draft)" in its entirety, with a total of 23 articles. It plans to establish and standardize the deposit insurance system, protect the legal rights and interests of depositors, and prevent and resolve them in a timely manner Financial risks and maintaining financial stability. [29] Among them, the maximum repayment limit is RMB 500,000; premiums are paid by the bank.