Pricing of Deposit Insurance
The author aims to provide guidelines for the pricing of deposit insurance in different countries. He presents several methodologies that can be used to set benchmarks for the pricing level of deposit insurance in a country, and quantifies how spec...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2002/07/1971354/pricing-deposit-insurance http://hdl.handle.net/10986/19262 |
| Summary: | The author aims to provide guidelines
for the pricing of deposit insurance in different countries.
He presents several methodologies that can be used to set
benchmarks for the pricing level of deposit insurance in a
country, and quantifies how specific design features affect
the cost of deposit insurance. The author makes several
contributions to our understanding of what drives the price
of deposit insurance. For example, he shows how risk
diversification and risk differentiation within a deposit
insurance system can reduce the price of deposit insurance.
The author also finds that deposit insurance is under-priced
in many countries around the world, notably in several
developing countries. More important, his estimates suggest
that many countries cannot afford deposit insurance. Deposit
insurance is unlikely to be a viable option in a country
with weak banks and institutions. The author does not
recommend a funded deposit insurance scheme, but rather he
argues that for countries that have adopted or are adopting
deposit insurance and have decided to pre-fund it, pricing
it as accurately as possible is important. |
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