Modis: A Market-Oriented Deposit Insurance Scheme

34 Pages Posted: 14 Feb 2006

See all articles by Reza Vaez-Zadeh

Reza Vaez-Zadeh

International Monetary Fund (IMF)

Danyang Xie

Hong Kong University of Science & Technology (HKUST) - Department of Economics

Edda Zoli

International Monetary Fund (IMF)

Date Written: December 2002

Abstract

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.

Keywords: deposit insurance, market-oriented approach

JEL Classification: G21, G28, G33

Suggested Citation

Vaez-Zadeh, Reza and Xie, Danyang and Zoli, Edda, Modis: A Market-Oriented Deposit Insurance Scheme (December 2002). IMF Working Paper, Vol. , pp. 1-34, 2002. Available at SSRN: https://ssrn.com/abstract=880864

Reza Vaez-Zadeh (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Danyang Xie

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

Clear Water Bay
Kowloon, Hong Kong
China
852-2358-7603 (Phone)
852-2358-2084 (Fax)

Edda Zoli

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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