Onour, Ibrahim (2013): Pricing the Cost of Deposit Insurance and Assessing Moral Hazard Effect: Evidence from Banking Sector in Sudan.
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Abstract
The primary aim of this paper to evaluate the cost of deposit insurance premium and assess moral hazard effect in the banking sector in Sudan. The analysis of moral hazard in this paper is based on two types of risks, credit default risk, measured as the ratio of non-performing loans to the total size of loans for each bank, and operational risk measured as technical inefficiency. The findings of the research indicate there is a positive association between insurance coverage premium and increase in each of these two risks, implying evidence of moral hazard effect. A policy implication of this result is that the moral hazard behavior in the banking sector can be mitigated by changing the current policy of flat rate deposit insurance premium to risk based insurance premium policy.
Item Type: | MPRA Paper |
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Original Title: | Pricing the Cost of Deposit Insurance and Assessing Moral Hazard Effect: Evidence from Banking Sector in Sudan |
English Title: | Pricing the Cost of Deposit Insurance and Assessing Moral Hazard Effect: Evidence from Banking Sector in Sudan |
Language: | English |
Keywords: | Deposit; Insurance; Moral hazard; Risk. |
Subjects: | G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates G - Financial Economics > G2 - Financial Institutions and Services |
Item ID: | 57082 |
Depositing User: | A Onour |
Date Deposited: | 05 Jul 2014 19:01 |
Last Modified: | 26 Sep 2019 08:40 |
References: | Cull, R., Senbet L., Sorge M., (Feb 2005) “Deposit Insurance and Financial Development” Journal of Money, Credit and Banking, Vol.37, pp.43-82. Demirguc-Kunt, A., and Huizinga H., (1999), “Market Discipline and Financial Safety Net Design”, Policy Research Working Paper No.2183, World Bank. Duan, J., and Yu, M., (1994) “Assessing the cost of Taiwan’s Deposit Insurance”, Pacific Basin Finance Journal, 2, pp.73-90. Kane E., (1995) “Three Paradigms for the Role of Capitalization Requirements in Insured Financial Institutions” Journal of Banking and Finance 19, 431-454. Laeven, L., (2002a) “Bank Risk Deposit Insurance” World Bank Economic Review, forthcoming. Laeven, L. (2002b) “ International Evidence on the Value of Deposit Insurance” Quarterly Review of Economics and Finance, 42(4), pp.721-732.. Merton, R., (1977) “An Analytical Derivation of the Cost of Deposit Insurance and Loan Guarentees” Journal of Banking and Finance, 1, 3-11. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/57082 |