DocumentCode :
1845528
Title :
A research of deposit insurance mechanism overcoming moral hazard
Author :
Zhu, Zhongyun ; Wang, Xianjia
Author_Institution :
Inst. of Syst. Eng., Wuhan Univ., China
Volume :
2
fYear :
2005
fDate :
13-15 June 2005
Firstpage :
1217
Abstract :
Though the deposit insurance system increases the stability of banking system by averting bank-runs, but it increases the instability of banking system instead because the depositors reduce the market discipline on the bank and the bank has the incentive of risk-taking excessively, this is so-called moral hazard. This paper designs an optimal deposit insurance mechanism overcoming the bank´s moral hazard by utilizing the theory and methodology of mechanism designing. The study shows that there exists an optimal deposit insurance mechanism satisfying the incentive compatible conditions to overcome the bank´s moral hazard in the deposit insurance market with asymmetrical information, however, compared to the deposit insurance mechanism under symmetrical information, both the deposit insurance coverage and the deposit insurance premium rate decrease.
Keywords :
banking; incentive schemes; insurance; asymmetrical information; banking system; deposit insurance coverage rate; deposit insurance market; deposit insurance premium rate; deposit insurance system; moral hazard; optimal deposit insurance mechanism; Banking; Costs; Design methodology; Ethics; Hazards; Insurance; Monitoring; Privatization; Stability; Systems engineering and theory;
fLanguage :
English
Publisher :
ieee
Conference_Titel :
Services Systems and Services Management, 2005. Proceedings of ICSSSM '05. 2005 International Conference on
Print_ISBN :
0-7803-8971-9
Type :
conf
DOI :
10.1109/ICSSSM.2005.1500191
Filename :
1500191
Link To Document :
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