Deposit Insurance Design and Implementation: Policy Lessons from Research and Practice

Abstract

This chapter explains how deposit insurance is capable of being either explicit or implicit. The former refers to coverage that is contractual obligations, while the latter refers to coverage that is conjectural. This study, then, add some new data points to the evidence and analysis in the chapter for the purpose of providing more guided decisions about deposit insurance adoption, design, and implementation. Other parts of the chapter include a review on cross-country econometric evidence on the costs and benefits of deposit insurance, and the practical lessons that can be derived from individual country experiences. In conclusion, the benefits or harms of deposit insurance on a country are dependent upon the design and administration that surrounds it. It is important, however, to be able to establish reliable procedures for contract enforcement before adopting explicit deposit insurance.

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