IMPACT OF THE DEPOSIT INSURANCE SYSTEM ON THE RISKS OF BANKS

Current study focuses on the analysis of the impact of the deposit insurance system on the functioning of national banking system. Literature review reflects the difference in the opinions of analytics about the character of this impact. Summarizing points of view one may conclude that in unstable periods deposit insurance system may strengthen the banking system and prevent customers run. At the same time, during periods of economic growth deposit insurance may lead to the additional moral hazard. This research focuses on the banking systems of the BRICS countries: Russia is part of it, and, according to some analysts, the BRICS countries have good prospects for development. However, this association, in the authors’ opinion, is rather artificial which is supported by the fact that development trajectories of its members as well as the achieved  results are very different. Nevertheless, there is a common element - intensive transitions leading to significant instability in the economy and the presence of serious social problems, in particular poverty, a strong stratification of society and corruption. First part of the article presents comparative analysis of deposit insurance systems in the BRICS countries. Its results demonstrate that the approaches to organization of deposit insurance among members of the association are somewhat different. For example, in South Africa, the deposit insurance system functions in an implicit manner (i.e., not legislated). In some countries it is privately owned (or has no state guarantees). The second part introduces mathematical and statistical analysis of the impact that deposit insurance system has on the level of risks that banks of BRICS take. Online availability and quality of data on the state of the banking systems and activities of deposit insurance systems allowed for a full-fledged analysis only for the Russian Federation and Brazil. As for the rest of member-countries, the authors performed brief analysis. The results of estimating models for panel data made it possible to conclude that the effect of increasing the amount of insurance cover on the level of risks depends significantly on the characteristics of the crisis situation (if any), the level of control of the banking environment by the regulator and the proportion of deposits in the balance currency that fall under the jurisdiction of the deposit insurance system.

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