Effects of Deposit Insurance System on Banks' Risk-Taking Incentives

This study is devoted to assessing the impact of the deposit insurance system on risk-taking incentives of banks. The sample was supposed to take into account data from all BRICS countries, but due to either the underdevelopment of the deposit insurance system or the lack of data, only Russia and Brazil were included in the final sample. Information was collected on changes in the amount of insurance coverage. In the regression model, the dependence of the Z-score default risk indicator on the change in the coverage value, as well as on the simultaneous growth of the ratio of deposits to the bank's assets, was considered. The results indicate that the increase in the amount of coverage (to 250,000 reais) led to an increase in the default risk for Brazil, for Russia - an increase to 700,000 rubles. The last increase in 2014 led to a reduction in the risk of bank failures due to the internal situation in Russia. Also, a significant negative relationship was found between the z-score and the joint variable of the change in coverage and the ratio of deposits to assets.