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Insurance Commons

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Finance and Financial Management

University of Kentucky

MPA/MPP Capstone Projects

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The Effect Of A Risk-Based Deposit Insurance Program In Korea, Youngil Oh Jan 2016

The Effect Of A Risk-Based Deposit Insurance Program In Korea, Youngil Oh

MPA/MPP Capstone Projects

Countries introduce a deposit insurance system to prevent bank-run and stabilize the financial market by protecting depositors. However, deposit insurance with a flat-rate system induces the insured banks to take more risky activities, an example of moral hazard. To deal with this problem, the Korea Deposit Insurance Corporation ('KDIC') adopted a Risk-Based Insurance Program ('RBIP ') for the Savings Banks ('SBs') on July 1, 2013, by charging a higher rate for the weak SB s and a lower rate for the healthy SBs. To mitigate the initial drastic impact on the SBs in an economic regression, the KDIC had reduced the ...