Impact of deposit insurance on banking industry of ASEAN countries

In quest of stability

Suhal Kusairi, Nur Azura Sanusi, Abd. Ghafar Ismail

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

The purpose of this paper is to study the impact of deposit insurance towards the stability of banking industry. The stability is measured by the ratio of retail deposit to total asset and the ratio of loan to total asset to cover both positive and negative impacts. By using panel data of 127 commercial banks from 2000 to 2013 in ASEAN region that consists of Indonesia Malaysia, Singapore, Philippine, Thailand and Vietnam. Through the utilization of panel data analysis, the result states that the implementation of deposit insurance policy negatively affects on the ratio of retail deposit to total asset while positively affects on the ratio of loan to total asset. It is very interesting finding as it implies that the deposit insurance policy causes the banking manager taking higher risk and increases their return rather than the deposit insurance policy that increases the confidence level of depositors, which in turn will increase the total deposit. In addition, the result also states that an increase in the ratio of loan to equity and sizes of bank will increase the ratio of the retail deposit to total asset and the ratio of loan to total asset. But, the effect of net interest margin on the ratio of retail deposit to total asset is negative while it is positive on the ratio of loan to total asset. This result is very important for the regulators to evaluate the deposit insurance policy and anticipate of any negative circumstances which will be incurred.

Original languageEnglish
Pages (from-to)41-50
Number of pages10
JournalBanks and Bank Systems
Volume10
Issue number4
Publication statusPublished - 2015

Fingerprint

ASEAN
Insurance
banking
insurance
assets
Deposits
industry
loan
Industry
bank
Banking industry
Deposit insurance
Assets
Vietnam
Philippines
Thailand
Singapore
Indonesia
Malaysia
data analysis

Keywords

  • Banking industry stability
  • Deposit insurance
  • Risk taking and moral hazard

ASJC Scopus subject areas

  • Finance

Cite this

Impact of deposit insurance on banking industry of ASEAN countries : In quest of stability. / Kusairi, Suhal; Sanusi, Nur Azura; Ismail, Abd. Ghafar.

In: Banks and Bank Systems, Vol. 10, No. 4, 2015, p. 41-50.

Research output: Contribution to journalArticle

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