This policy paper first sketches the building blocks of a banking union. Importantly, a new EuropeanDepositInsurance and Resolution Authority (EDIRA) should start simultaneously with the ECB assuming supervisory powers. A combination of European supervision and local resolution cannot work because it is not ‘incentive compatible’. Next, this paper proposes a transition period to gradually phase in the Europeandepositinsurance coverage. Finally, we calculate that a EuropeanDepositInsurance Fund would amount to about €30-50 billion for the 75 euro area banks that were subject to the EBA stress tests. This Fund could be created over a period of time through risk-based depositinsurance premiums levied on these banks. Once up and running, the Fund would then turn into a EuropeanDepositInsurance and Resolution Fund to also deal with the resolution of one or more of these European banks.
• General: There is the ‘traditional’ transitional issue for depositinsurance. How to get the fund ready at the same time as the guarantee kicks in. Since the EuropeanDepositInsurance scheme proposed here would substitute for existing national schemes, it could in principle obtain its initial funding from the existing national funds, which will have a much lower financing need given that the EBA banks account for a large share of deposits. A simple transfer of funds from national depositinsurance funds to a new EuropeanDepositInsurance Fund will be troublesome, because not all countries have pre-funded schemes. But this problem may be not that severe in practice, since most pre-funded schemes are currently more or less exhausted as a result of pay-outs during the on-going financial crisis. 3 Moreover, a consensus is emerging for pre-funded
The financial crisis shows that investor confidence is pivotal to financial stability. Panic bank runs in e. g. the United Kingdom have exacerbated liquidity shortages on European capital markets. Spill-overs from banking to related sectors have decreased investments, production and finally culminated in an economic crisis of global scale. Effective policies on financial stability therefore need to ensure that depositors trust the banking system and to this, ensure repayment of savings. Deposit guarantee schemes represent one of various means to this end (Hartmann-Wendels, Pfingsten & Weber, 2007; Bruni, 2009). Since 1994 European states have common standards for depositinsurance to manage free flow of capital and financial services. In response to panic withdrawals in 2007 the European Union has increased coverage to EUR 100.000 and reduced payout delay to 20 days (see Directive 2009/14/EC). For sustainable confidence among depositors and hence, long-term stability on markets for capital and financial services states have committed to harmonize their systems further and thus charged the Commission to sketch options for pan-Europeandepositinsurance (Art. 12) (European Parliament & Council of the European Union, 2009). The according proposal developed in line with public consultations has been rejected by various states. Actors involved in the policy process obviously lack incentive to joint action on depositinsurance for the purpose of systemic stability (Aspinwall & Greenwood, 1998; European Commission, 2009). Despite previous support for enhanced cooperation, member states cannot settle upon details of policies (Parliament & Council, 2009). The failure of the 2010 proposal suggests therefore to get the bottom of following questions:
Germany seems to be a major opponent of the SRM (SRM) and has successfully asserted against other member states in pushing through an intergovernmental agreement for parts of the policy (European Commission, 2014; Pepe, 2013, September 18). Furthermore should EU banking regulation be of particular interest to Germany because of its high share of banks (~24,1%) which is actually the highest in the Euro area (ECB, 2014, p. 1). Its special banking system makes the state an interesting case for study, too: Banks in Germany differ in their legal form, and this has an impact on their focus in business and their approach to insure deposits of customers against payment defaults of single institutions (Wurm, Wolff & Ettmann, 2004). In 2012 Germany has thus come to attention for opposing a pan-Europeandeposit guarantee scheme – another pillar of the banking union –and has ever been defending its three-pillar system of banks against any European measure that might potentially erode it 13 . Pan-Europeandepositinsurance has indeed been perceived as doing so and evoked domestic opposition to merging national systems in Europe for that reason. This is partly due to the German systems (Wurm, Wolff & Ettmann, 2004) which are incompatible with deposit guarantee schemes in some cases. Insofar the Commission (2013a, pp. 32, 28-29) now intends to link depositinsurance to banking resolution through means for mutual lending between the systems Germany’s position to the SRM (SRM) might be rooted in technical grounds alike. Apart from depositinsurance EU-banking resolution draws on the European Stability Mechanism (ESM) to bridge shortages in capital and thus maintain markets in Europe stable when banks of systemic importance are winded up. This fund has however been established to stabilize states (and not banks) in the euro-area and get them through the Eurozone crises. For that reason there have been heavy discussions on whether to recapitalize banks through the European Stability Mechanism (ESM) and thus on whether to use it as a final backstop in banking resolution, furthermore (Malhere, 2013, October 14). Since Germany contributes the highest share (27%) to the Stability fund (ESM, 2014) there should be some clear national preference on how these assets are used. In addition to aspects being peculiar to Germany, theories on European integration may reveal more general grounds on which member states either support or block European initiatives to deeper integration instead. These will be unpacked with a view to the German stance on the SRM (SRM).
After the creation of the Single Supervisory Mechanism and the Single Resolution Mech- anism, the debate has now shifted to the third pillar of banking union, the EuropeanDepositInsurance System (EDIS). The policy debates on EDIS and on the backstop to the resolution fund are necessary but controversial because they concern the fiscal dimension of banking union (Pisani-Ferry and Wolff, 2012). The primary role of depositinsurance is to create and maintain trust in the financial system. Depositors’ confidence in the safety of their deposits in banks is fundamental to financial stability and banking stability in a monetary system based on fiat money. There are three basic arguments that call for the creation of a pooled Europeaninsurance system (Wolff, 2016). The first is about size: insurance works better, the greater number of banks that it covers. If insurance in a small country only covers a few banks, a claim could increase the costs of subsequent insurance permanently, thereby imposing a burden on the country’s banking system. Second, centralised supervision while deposit insur- ance is decentralised is inconsistent. In extremis, national depositinsurance and national tax- payers would have to stand ready to address problems that have arisen because of potentially inadequate European supervision. Third, decoupling banks from sovereigns, the very aim of banking union, requires Europeandepositinsurance as otherwise confidence will depend on the creditworthiness of the sovereign. Europeandepositinsurance will therefore increase financial stability and improve crisis management.
Common operational arrangements decided at Community level. We are currently far from such a situation, since in Europe depositinsurance has an essentially national basis. Thus, only the German, Belgian and Italian depositinsurance schemes extend their coverage to branch deposits of domestic banks abroad, with the reservation in the case of the last two countries that the host country does not provide itself protection; while all systems provide coverage to the deposits of foreign banks in their territory. With regard to foreign currency deposits in the national territory, some Europeandepositinsurance schemes give them protection, as in Germany, Italy and Spain, while others do not in France, Belgium and the United Kingdom. On the other hand, each Fund would be subject to the supervision of a Community body set up for that purpose. In doing so, despite the multiplicity of DepositInsurance Funds, we would achieve a unified, principled system that reflects the most recent thinking on the subject.
2.2. The Current Research Status of DepositInsurance System Early in our country has not yet issued the depositinsurance system, there is a lot of research and analysis of the depositinsurance system in our country to emphasize the necessity and feasibility of implementing   . As coun- tries successively promulgated the depositinsurance system, scholars at home and abroad in view of the system from the impact of recessive to dominant mor- al hazard for banks this Angle, found that dominant bank depositinsurance can significantly reduce the excessive risk of the bank . The promulgation of the depositinsurance system in China marks the transition to the dominant system by the recessive deposit system in China. Compared directly with the central bank bail-outs, depositinsurance system can reduce the central bank to regula- tory uncertainty of commercial bank, also reduced the risk of moral hazard, make the internal governance of banks is high . The establishment of depositinsurance system is to prevent a run on the bank of deposit of bankruptcy, the establishment of the system makes the bank to deposit interest rate and the risk of default is more sensitive to loan , which makes originally implicit system of the concept of “Too big to fail” may no longer apply.
innovative and courageous proposal. It is courageous because it will clearly be very controversial in a number of member states (especially Germany) and it is innovative because it proposes a three-stage process, starting with re-insurance, then switching to co-insurance and finally to full direct insurance of deposits via a ‘single’ DepositInsurance Fund (DIF). This final stage should be reached in 2024, which is also the date at which the Single Resolution Fund (SRF) will become the only source of financing for bank resolution. The Commission’s proposal calls for integrating the decision-making for EDIS into the decision- making entity for the SRF, namely the existing Single Resolution Board (SRB). This makes sense if one views resolution and depositinsurance as two highly interlinked dimensions of dealing with banks in trouble. In this view the two dimensions should be bundled into one institution – and one suspects that over time the two funds (the SRF and the DIF) could be merged into one.
assumption is made by Hoelscher (2011) when sug- gesting that policies needed in stable times should differ from those needed in a broad financial crisis. According to him in systemic crisis deposit insur- ance was inadequate for stabilizing expectations as no one knows true financial conditions of the system and future profitability of any business model. In this circumstances full guarantees are needed to contain the crisis. As he states the assumptions about the role of depositinsurance in depositor protection and main- taining financial stability has evolved and its role in the safety net has been strengthened, but it underwent important changes in light of the 2008/9 global crisis These changes are leading to a rethinking of the op- timal design features of the depositinsurance system to further strengthen depositor protection and hence the role above.
Determine of the problem. According to foreign investors the Ukrainian insurance market has portfolio s’ investors, strategies to output on ІРО and other possibilities to attract the capital. Therefore the large world groups of financial sector will come to Ukraine in the nearest years. It should be mentioned that the Ukrainian insurance companies concerning to investment attractiveness and public are not yet ready to go into international capital markets. Working on a prospect, it should take into account the quantity estimation in dynamics of the Europeaninsurance market changes. For example, growth of insurance market is not observed in «old Europe», sometimes there are limitations of maxim um particle at the insurance market, which are regulated by antimonopoly committees. Taking into account this experience, in the process of the internal Ukrainian insurance market development have being examined the questions of structure changes of the internal insurance Ukrainian market in relation to the particle of foreign investments in the equity of domestic insurance companies. The index of part of premiums in GNP is the estimation of insurance market development dynamics (%). The most important and very hard task is to exposure indicators for estimation of market dynamics, in the decision of which regressive models can be useless.
an endogenous mechanism of the bank’s self-strengthening and suppression of risk that can form a joint force with external restraint and other legal supervi- sions. Which is of great significance to the healthy development of China’s banking industry? However, China’s implicit depositinsurance system weakened the bank’s power to prudent operate, so that the bank’s franchise value cannot be bound by the risk of banks. China’s depositinsurance regulations are much tar- geted in the content set after studying the experience of each country. The expli- cit depositinsurance system has played a positive role in restoring the self-dis- cipline effect of the franchise value after the implementation. However, due to the implementation of the government invisibility guarantee for a long time, so it is in the transition period of explicit depositinsurance and implicit depositinsurance plays an important role in common. We should adhere to the explicit depositinsurance in our country, enhance the study of depositinsurance, and improve the depositinsurance system of our country to give play to the self-dis- cipline effect of the franchise value, at the same time, can restrict the risk of com- mercial banks in the context of interest rate marketization.
Existing mutual guarantee schemes provide another rationale for reinsurance. These schemes, notably among the German savings banks, exist usually among groups of small savings institutions, all of which have a very similar business model. Groups of banks with a mutual guarantee system constitute essentially one large bank from the point of view of a depositinsurance system. There is no reason to dissolve systems that have worked well so far. But these supervisory authorities from 20 EU member states participated in the exercise. In each of the 27 member states, the sample was built by including banks, in descending order of size, so as to cover at least 50% of the respective national banking sector, as expressed in terms of total assets. As the stress test was conducted at the highest level of consolidation for the bank in question, the exercise also covers subsidiaries and branches of these EU banks operating in other member states and in countries outside Europe. As a result, for the remaining seven member states where more than 50% of the local market was already covered through the subsidiaries of EU banks participating in the exercise, no further bank was added to the sample. The 91 banks represent 65% of the total assets of the EU banking sector as a whole. For about 10 of these banks no data on customer deposits was available.
banks. Song comments that there may exist concerns for transparency because mar- ket participants may not be fully aware of the ring-fencing contracts, and markets could operate in a very different way during crises due to the ring-fencing regulations. Empirical studies for ring-fencing retail banking subsidiaries from other activities are hardly possible because of the lack of data. The existing empirical studies on ring fence in banking industry focus on cross-border ring fencing (insulating domes- tic subsidiaries from foreign parent banks). Cerutti et al(2007)  find evidence that subsidiary operations are preferred by foreign banks seeking to penetrate host markets by establishing large retail operations, while bank branches are more com- monly found in countries that have higher taxes and lower regulatory restrictions. Cerutti et al(2010)  focus on the costs of ring-fencing (measured in terms of the amount of external capital that is required to cover capital shortfalls faced by the affiliates of these groups as a result of a credit shock) for cross-border banking groups under three different forms of ring-fencing (Partial, Nearly Complete, and Full Ring Fencing). With the data from European bank groups and markets, they find evidence that under stricter forms of ring-fencing, sample banking groups have substantially larger needs for capital buffers at the parent and/or subsidiary level than under less strict or in the absence of any ring-fencing.
We have a large sample of car insurance offers made by a Europeaninsurance company during 2012. Only one purchase price is offered to a specific prospective customer for a specific product by one of the sales personnel. The customer’s response to this offer can either be to accept it or reject it. This response is reflected in the data set as a binary variable. The data also contain information about the characteristics of each individual contacted (age, place of residence, driver’s license details, etc.) and the car involved (make, fuel type, age, etc.), as well as the price offered, the tariff price, and the estimated expected claims cost. The data set comprises 154,278 offers, of which 81,854 are associated with a random price test, allowing us to estimate the price elasticity and all the parameters for profit optimization. During the price test experiment, a specific price change was randomly assigned to each price offer of either − 5%, 0%, or +5% of the tariff price, thus enabling us to measure the effect of a price change on purchase probability. To the other 72,424 offers, which are not associated with the pricing experiment, we applied the two alternative models for optimal pricing in order to compare their outcomes with respect to the expected total profit.
One of the primary goals of deposit-insurance implementation was to draw out the estimated USD40 billion in cash savings held by Russian citizens “under their mattresses” and outside of the banking system, which then could be used by banks as the basis for new loans. Specifically, the Law on DepositInsurance defined three closely related goals: (i) the protection of depositors’ funds, (ii) the increase in the depositors’ confidence in the Russian banking system and (iii) the attraction of household savings in the Russian banking system. These goals arose out of historical experience of Russian depositors, who had been victimized by the losses suffered during the banking crises of 1992, 1995, and 1998, which collectively led to a loss of confidence in privately owned banks.
Depositinsurance is generally considered as an important institutional arrangement for the stability of the banking system. Currently more than 90 countries and regions around the world have established depositinsurance sys- tem. The recent crisis occurred in 2008 made 165 banks go bankrupt in the United States, which involves total deposits of 318.9 billion dollars. The federal deposit in- surance corporation (FDIC) had played a positive role in a series of important crisis disposal process. To streng- then the depositors’ confidence, many counties chose to increase the coverage of depositinsurance during the crisis period. On one hand, the financial institutions may benefit from depositinsurance for the reduction of opera- tional risk, on the other hand, they have the motive to increase the credit risk after taking depositinsurance, which may bring more threats to the financial system (See [1,2]). Therefore, it is worth concerning with the above dual effects of depositinsurance.
However, several studies argue against the theory. Gropp and Vesala (2004) study bank behavior in the European Union area. They find that depositinsurance can reduce bank incentives to take excessive risk because unguaranteed deposit owners will monitor banks more closely. Without the introduction of a depositinsurance system, depositors tend to assume that governments will assist any bank which experiences liquidity problems (implicit guarantee). Therefore, there is no incentive for depositors to actively monitor their bank performance. As well, Karels and McClatchey (1999) find that the establishment of depositinsurance in the U.S. credit union industry did not lead to increased risk-taking behavior. Gueyie and Lai (2001) argue that the establishment of official depositinsurance in Canada did not provide more incentives for banks to conduct risk-shifting. Another potential problem in the existing mandatory depositinsurance system is that the risk profile of the premium rate is flatter than the risk profile of the actuarially fair premium rate 3 . As a result, deposit insurers could not compensate all deposits when a major bank or some banks are liquidated.
From the analysis of related literature, analysis and interpretation of data, the study concludes that. Consolidation exercise through mergers and acquisitions has not improved the profitability performances of banks significantly. Equally important, is the fact that introduction of consolidation through merger and acquisition has brought about changes in ownership structure. It has brought about decentralization of ownership to many shareholders contrary to over centralization of ownership in the hand of few shareholders prior to mergers and acquisitions of money deposit banks in Nigeria. The study further shows that one of the fall outs of the mergers is the shrinkage in the industry from 89 to 22 banks (Okpugie et al. 2005.Nigeria has a mega banks with huge capital to invest, but it is instructive to note that size and huge capital does not necessarily make a good and sound bank. What makes a sound bank is really how effective and efficient the management of the bank is deploying the available resources. Generally, the study affirms that for a bank to survive in the current dispensation it needs to maximize its comparative advantage (strength), by promoting its uniqueness in the areas where it performs best. The decisive factors for competition and profitability in the new era would be the optimization of resources by the emerging mega banks .If any bank wishes to compete in the coming era, now is the time to plan for optimal resources structure, because the banks with the best brains and best hands would have an uncommon edge not only for future profitability but also survive future failure.
However, special design of depositinsurance system, namely, imposition of coverage limit is believed to effectively solve the problem of weakened market discipline. The most straightforward principle is regarded by Demirgüç-Kunt, Kane, & Laeven (2006) to be setting enforceable coverage limits. Insurers' first priority must be to assure that official supervision complements private monitoring. To accomplish this, the scheme must be designed and managed in ways that convince large depositors that part of their funds are truly and inescapably at risk (Demirgüç-Kunt, Kane, & Laeven, 2006). Ioannidou & Dreu (2006) follow the idea that depositinsurance causes a significant reduction in market discipline. But at the same time they show that the effect of depositinsurance largely depends on the coverage rate. When the coverage rate is more than 60 percent, market discipline is significantly reduced and it is completely eliminated when the coverage rate reaches 100 percent (Ioannidou & Dreu, 2006). The same idea is supported by Schich (2008) and Velikova (2006). They also state that establishment of the coverage limit for insured instruments is critical. Coverage must be sufficient to prevent destabilizing banking runs, but not so extensive as to eliminate all effective market discipline on the bank's risk-taking (Schich, 2008; Velikova, 2006).
In practice, size and conduct of financial planning, as well as data used and method- ology applied, differ significantly among deposit insurers. By definition, there is a differ- ence in regular financial planning according to funding i.e. if there is an ex-ante, ex-post or combined DIS. Ex-post and combined schemes have to be focused on the risk of default i.e. bankruptcy and mechanisms for the fast collection of necessary resources. An ex-ante DIS is concerned about regular, constant collection and fulfilment of banks’ legal obligations as related to premium collections. There are many other variations, especially if collection is in relation to the risk of each particular member of the scheme. Furthermore, financial plan- ning differs if the law explicitly sets the premium level as a percentage of a defined base or if the law only prescribes caps (or ranges) for the annual premium allowing the DIS to de- termine each year a more appropriate level of premium. Criteria for determination of the annual premium may be set in the law itself or in the form of internal regulations. Financial planning differs and depends on the authority given to the DIS and availability of informa- tion needed for analysis and/or on the level and maturity of cooperation among safety-net institutions. Functions of financial planning will determine the planning process, too. If a DIS chooses to use financial planning for budgeting purposes only, the data used and ap- proach taken will not be the same as in a DIS which is trying to optimize its fund and uses financial planning for strategic reasons. But it is of great importance that, whatever the ap- proach used, a DIS should focus its financial planning efforts on the available resources in relation to risk, i.e. the potential outflow for deposit payout. This is the only way it can de- termine its adequate fund size and adequate financing needs. In order to assess the potential payout, a DIS must take into consideration the risks of the member institutions.