Pricing of deposit insurance

By: Material type: TextTextSeries: Policy Research Working Paper, no. 2871Publication details: Washington, D. C. The World Bank 2002Description: 69 pSubject(s): DDC classification:
  • 368.85 L2P7
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. http://documents.worldbank.org/curated/en/917821468739467603/Pricing-of-deposit-insurance
List(s) this item appears in: World Bank Working Paper Series
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Books Vikram Sarabhai Library Rack 26-A / Slot 1204 (0 Floor, East Wing) General Stacks 368.85 L2P7 (Browse shelf(Opens below)) Available 155580

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.

http://documents.worldbank.org/curated/en/917821468739467603/Pricing-of-deposit-insurance

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