Can the Indonesian banking industry benefit from a risk-based deposit insurance system?

Muhammad Nizar and Alfan Mansur

Macroeconomics and Finance in Emerging Market Economies, 2023, vol. 16, issue 1, 177-196

Abstract: A risk-based premium scheme could be a reliable system to determine a fairer deposit insurance premium. This research aimed to assess Indonesian banks’ risk profile, including per size classification and ownership as well as to counterfactually simulate a risk-based deposit insurance system for the individual banks. This research combined analysis of variance (ANOVA) and non-parametric approach applied to 75 banks (2008q1-2019q3). The results showed that big banks did not necessarily posture better risk management compared to small banks. Also, under the risk-based scheme, banks with better risk management could be rewarded, while less prudent banks could be punished.

Date: 2023
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DOI: 10.1080/17520843.2021.1928527

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