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Topic. Deposit Insurance. The Mission of DPS. Maintain an effective and efficient Deposit Protection Scheme. I991 Subsequent bank runs + Bank of Credit and Commerce International (BCCI) Crisis 1992 : Public consultation  Reject 1997:

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  1. Topic • Deposit Insurance

  2. The Mission of DPS Maintain an effective and efficient Deposit Protection Scheme

  3. I991 Subsequent bank runs + Bank of Credit and Commerce International (BCCI) Crisis 1992 : Public consultation  Reject 1997: Asian financial crisis  Concern in banking system 1998 : HKMA recommend commissioned a consultancy study October2000 consultation paper was issued for public consultation April 2001 Chief Executive in Council approved May 2004 Enactment of the DPS Ordinance July 2004 The Hong Kong Deposit Protection Broad was formed The Development of DPS

  4. Objectives • Providing a measure of protection to depositors • Contributing to the stability of the banking system • Prevent withdrawal of funds from a bank will led to a bank failure • Minimize the likelihood of a bank failure caused by rumor • provide an orderly means of compensating depositors

  5. Countries with Explicit ,Limited Deposit Insurance Systems Deposit insurance is a measure taken by banks in many countries to protect their clients’ savings • Africa(4) • Asia(10) • Europe(32) • Middle East(4) • Western Hemisphere (17)

  6. FDIC in USA • The Federal Deposit Insurance Corporation • United States government corporation • Glass-Steagall Act of 1933 • Provides deposit insurance up to $100,000 per depositor

  7. FDIC in USA Types of accounts covered • Checking accounts, Negotiable Order of Withdraw, MMDAs • Savings accounts • Money market account • Certificates of deposit (CDs)

  8. FDIC in USA Types of accounts not covered • Investments such as US Treasury securities • Stocks, bonds, mutual funds and money markets funds • Losses due to theft or fraud • Errors made in your accounts

  9. Comments problems of moral hazard CAMEL ratings (Capital adequacy) 、 (Asset quality) 、 (Management) 、 (Earnings) 、(Liquidity) rewarded for having strong management and good asset quality

  10. moral hazards for insurance can't be eliminated, but can be minimized • Coinsurance • attractive conditions and encourage those depositors including small, large depositors, debtors • Enforce it clearly • Let depositors know how the system works • Increase system transparency

  11. Assets in banks : liquid assets and inestimable loans • When most depositors request to pay cash, the banking system may go into a fragile stage. • Public know the system clearly, such as interests ,principal • Definition among all banks should be the same

  12. Adverse selection regulate all banks should participate mandatory 2006年中期報告 Hang Seng 54 % Dah Sing 83%

  13. FDIC in USA • Almost 100% of bank deposits are insured and only 3 % of US deposit-taking institutions are not member. • Membership of the scheme is part of marketing strategy

  14. DPS in HK • Quality of bank management and regulations • Depositors money is not put in to danger stage • government

  15. Group 7 • Chung Chun Kwong ,043128 • Chung Wing Leung, 043137 • Kwong Tik Man, 043147 • Ngan Yee Kwan, 043157

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