Establishment and Development of Deposit Insurance Systems (Based on the Example of Foreign Countries and Russian Federation)

The deposit insurance system (DIS) is one of the characteristics of the quality of financial institutions. DIS can increase the confidence of depositors to banking system, because DIS is a guarantee of savings. However, the introduction of deposit insurance system can have a negative consequences. The paper presents a study one of the phenomenon in the banking sector such as moral hazard. The term "moral hazard" requires to be defined. The research aims to reveal how the DIS affect on market discipline and on banks risk taking activities. During the writing of this work the following tasks were solved: 1) To examine the main theoretical aspects of deposit insurance systems; 2) To consider and to compare the features of the foreign and Russian practice of deposit insurance systems, in particular: 3) To examine reason and forms of moral hazard; 4) Empirical analysis of the influence of the deposit insurance coverage on bank risk taking activities based on the example of Russian Federation, in particular: 5) Examine the main ways to minimize the moral hazard on the example of the Russian Federation, in particular: For the purpose of this study we used econometric approach, in particular regression analysis with a choice of the best model. This paper presents the construction of models, using econometric software Eviews 7.0. The study model has been tested on the collected panel data for each risk individually, using different models. For this study, we selected the first 120 credit organizations based on the ranking of banks in terms of deposits who are the members of the deposit insurance system. Thus the testing of the model showed the presence of moral hazard in the Russian deposit insurance system, but we cannot say at the same time that a Russian investor fails to comply with market discipline. Therefore further we considered various ways to minimize the moral hazard on the example of the Russian Federation.