## I Overview

## Source details

**Canonical URL:** [I Overview](https://www.imf.org/-/media/websites/imf/imported-publications/external/pubs/nft/op/251/_op251.pdf)

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### Context and recent developments
- Deposit insurance systems have developed and expanded rapidly in recent years.
- A large number of countries have modified their systems, either adopting explicit deposit insurance systems or introducing significant modifications to existing systems.
- The international community has participated in the debate on the appropriate design of safety nets in general and deposit insurance in particular.
- In 2001, a working group of the Financial Stability Forum (FSF) published a report on the broad range of options for establishing a deposit insurance system.
- In 2003, the International Association of Deposit Insurers (IADI) was established to promote international cooperation and to encourage widespread international contact among deposit insurers.
- The IADI conducted surveys in 2002 and 2003 on 47 countries.

### Objectives of the paper
- First objective: Describe recently established insurance systems and identify emerging trends, updating earlier surveys and references.
  - Two previous IMF publications (Garcia, 1996, 2000) remain valuable references.
- Second objective: Identify sound practices in deposit insurance based on recent experience.
  - The starting point is the FSF report (FSF, 2001), which contains over 40 recommendations ranging from broad policy considerations to detailed directions on the management and operation of a deposit insurance system.
  - The paper builds on FSF guidance, identifies good practices in design, and provides evidence for resolving trade-offs identified by the FSF.

### Data sources and scope
- The paper is based on public information obtained from central banks, ministries of finance, and deposit insurance agencies and on the 2003 update of the World Bank’s database on banking regulation.
- Approximately 200 countries have been included and updated in the survey.
- The completed questionnaires as well as a brief summary of findings are available at www.iadi.org.

### Relation to academic and econometric literature
- The paper seeks to place policy recommendations within the growing body of economic literature on deposit insurance systems.
- Recent years have seen attempts to develop econometric tests of the influence exercised by explicit deposit insurance, and of the impact of different design features of deposit insurance systems.
- Careful consideration is required because some of this work has been used to draw policy conclusions about the merits of adopting explicit deposit insurance.
- A number of studies conclude that the existence of explicit systems increases the risk of banking crises, and also point to design features—such as the desirability of ex post funding—that run counter to the views of many deposit insurance practitioners.

### Purpose and intended use of sound practices
- The sound practices described are not meant to become “best practices” or “core principles” such as those developed by international standard setters.
  - Example standard setters: the Basel Committee (Basel Core Principles for Effective Banking Supervision), OECD, and the International Association of Insurance Supervisors.
- Rather, the practices outline international experience in resolving important issues related to deposit insurance alternatives, illustrating that some design features can be seen as comparatively more efficient than others.
- Authorities may opt for practices different from those described here, reflecting concerns about local conditions or specialized objectives.
- The description of procedures is not meant to change such decisions but to ensure relevant factors are taken into consideration.

### Paper structure (contents)
- Section II: Discussion of explicit and implicit deposit insurance, including recent academic literature and policy recommendations.
- Section III: Review of conditions to be weighed when considering the introduction of a deposit insurance system, including policy objectives and necessary preconditions.
- Section IV: Specific design features of deposit insurance systems, including mandates, powers, accountability, transparency, funding, membership, cover, and public awareness.
- Section V: Design features aimed at minimizing the impact of moral hazard.

*Source: IMF staff paper — I Overview (content unit: _op251)*

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_Source: https://www.imf.org/-/media/websites/imf/imported-publications/external/pubs/nft/op/251/_op251.pdf_