Target Funding

Djurdjica Ognjenovic

Chapter 4 in Deposit Insurance Schemes, 2017, pp 157-181 from Palgrave Macmillan

Abstract: Abstract Target funding is focused on the establishment of the desired level of an ex ante DIF over a medium-term time frame. It is a measure for the DIS’s desired payout capacity and sufficiency. Deposit insurers face challenges when choosing a method for setting and adjusting the target fund size level. If a decision on the target fund size level is made arbitrarily, it ignores the actual riskiness of banks and undermines its potential usage for funding optimization. This chapter introduces the concept of target funding and explains how target funding improves financial management practices and increases awareness on the DIF’s adequacy. It explains the difference among the applied methodologies and discusses how adjustment on annual regular premium should be used in parallel with the approved target fund size methodology.

Keywords: Target fund size level; Risk assessment; Regular funding; Premium adjustment (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-51143-6_4

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DOI: 10.1007/978-3-319-51143-6_4

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