Target Deposit Insurance Fund – Global and Regional Trends

Abstract: The funding mechanism of a deposit guarantee scheme (DGS) is a key factor that enables the proper functioning of the scheme as a whole and attests to its credibility. The primary source of financing for the scheme is usually an ex-ante deposit insurance fund, whose reserves are used to pay out covered deposits upon the occurrence of an insured event. In most jurisdictions, both the target size of the deposit insurance fund and the timeframe within which it must be reached are prescribed by law. The target fund and the time available to reach it constitute the main elements for setting the annual deposit insurance premium levels paid by banks. Approaches to defining this amount depend on many circumstances and are largely based on historical data and assessments of the need to use the fund’s reserves. At the same time, it is important to identify potential sources of supplementary funding in the event of a large-scale financial crisis. In this paper, our aim is to identify global and regional trends in determining and subsequently achieving target levels of deposit insurance funds, as well as their correlation with funding sources and the purposes for which their resources are used.