Modis : A Market-Oriented Deposit Insurance Scheme

Author/Editor:

Edda Zoli ; Danyang Xie ; Reza Vaez-Zadeh

Publication Date:

December 1, 2002

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 02/207

Subject:

English

Publication Date:

December 1, 2002

ISBN/ISSN:

9781451874662/1018-5941

Stock No:

WPIEA2072002

Format:

Paper

Pages:

33

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