加拿大金融保险留学essay [4]
论文作者:英语论文论文属性:短文 essay登出时间:2014-12-07编辑:yangcheng点击率:23293
论文字数:7622论文编号:org201412042311298650语种:英语 English地区:加拿大价格:免费论文
关键词:加拿大留学论文金融保险Insurance Financial过度风险
摘要:本文是一篇加拿大金融保险留学essay,存款保险制度在促进经济金融的稳定中发挥了非常重要的作用。在全球范围内大多数发展中国家有存款担保制度。
ve to the consumers and the shareholders to monitor their banks activity, when banks take excessive consumers will not discipline their banks by withdrawing their deposits. When the insurance system is limited banks will be cautious in their activity because the chance depositors monitor the bank is high and will demand more return on their deposits.
The moral hazard of explicit deposit insurance in the recent times has been quite high. When a coverage limit of the deposit is higher the market discipline is significantly reduced (V.P. Ioannidou and Jan de Dreu 2006). Empirical Studies show the explicit deposit insurance has given incentive to moral hazard. The deposit insurance system can equally contribute to financial stability and also destabilize the system. However designing the system effectively will reduce the moral hazards. Many countries do not provide full guarantee to their depositors, the large depositors are left unprotected. This is because they are expected to watch the bank closely and withdraw their money if the bank involved in excessive risk. Insurance scheme, design features and incentive compatible techniques are the key to overcome the moral hazard problems. The coverage limit of the insurance system must be designed effectively to maintain long run financial stability.
TOO BIG TO FAIL
The government extend deposit guarantee beyond the limit established in the deposit insurance system when the big banks face a failure. This is because a failure of big banks can lead to major financial disruption in the economy. This practice is known as too big to fail. The government intervention to guarantee all the depositors and protect the bank gives rise to moral hazard problem and undermines the long run financial stability. When the large depositors know that the bank is too big to fail they will not police their bank. This policy will also give incentive to banks to take excessive risk, which will result a bank failure.
The term came into common usage in United States during 1984. For example, Continental Illinois the seventh largest bank faced solvency problem during 1984. Federal Deposit Insurance Corporation during the time guaranteed deposits up to $100,000, the insurance guarantees at the time of bank failure was extended and protected all the depositors.(Fedric S. Mishkin, 7th edition) The FDIC injected a huge amount of capital in to the failing big bank and protected the investors and consumers. This policy has made bank failure likely and caused financial instability in United States. The regulators are reluctant to allow the big banks to fail as it can threaten the financial stability. The recent crisis of northern rock also was not allowed to fail because it was classed as too big to fail the government made a decision to protect the bank because
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