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Modis: A Market-Oriented Deposit Insurance Scheme
Author:
Ms. Edda Zoli
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Danyang Xie null

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Reza Vaez-Zadeh null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2002: Issue 207
Language:
English
Publication Date:
01 Dec 2002
DOI:
https://doi.org/10.5089/9781451874662.001
ISBN:
9781451874662
ISSN:
1018-5941
Pages:
33
Keywords:
WP; interest rate; insurance system; insured deposit; deposit insurance; market-oriented approach; insurance scheme; guarantee scheme; insurance agency; deposit liability; protection arrangement; Insurance; Moral hazard; Bank deposits; Distressed institutions; Global; Middle East; Western Hemisphere; Europe; Africa
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper argues that an optimal deposit insurance scheme would allow the level of insurance coverage to be determined by the market. Based on this principle, the paper proposes an insurance scheme that minimizes distortions and embodies fairness and credibility, two essential characteristics of a viable and effective deposit insurance scheme. Using a simple model for the determination of the optimal level of insurance coverage, it is shown that the optimal coverage is higher for developing compared to developed countries; a condition that is broadly satisfied by prevailing deposit insurance practices around the world.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund