Ausrine Lakstutiene

Research on Risk-Based Common European Union Deposit Insurance System in Lithuanian Banks

Global 2008 financial crisis has shown that the deposit insurance system did not help to maintain depositor confidence and the whole banking sector financial stability in the beginning of banks’ failure. Scientific discussions emphasized that the main problem associated with the current deposit insurance system is the fact that many EU countries, current deposit systems do not evaluate the banks’ risks calculating deposit insurance premiums, and thus do not provide sufficient stability of the banking system. The aim of the research is to evaluate the risk-based common European deposit insurance system impact on deposit insurance premiums to Lithuanian banks. The research period for the analysis of deposit insurance premiums to Lithuanian banks is 2010–2014. In the risk-based model, the main risk indicators are evaluated by European Banking Authority. Performed deposit insurance system problem analysis showed that deposit insurance system has positive characteristics, it is a key tool in the fight against depositors panic and helps to maintain confidence in the financial institutions, but it also has a negative impact. Theoretical deposit insurance models evaluation showed that in many EU countries, the existing deposit insurance systems do not provide sufficient protection on depositors because contributions are not based on banks’ risk assessment, which means that deposit insurance does not perform one of its basic functions. The introduction of risk-based deposit insurance system would redistribute contributions among the Lithuanian banks and thus contribute to the negative effects of deposit insurance systems mitigation and growth of all financial system stability.

The importance of systemic risk assessment in a risk-based common European Union deposit insurance system: case of Lithuania

Abstract The financial crisis has shown that the deposit insurance system did not help to maintain depositors’ confidence and financial stability for the whole banking sector. In order to ensure equal protection to depositors in all European Union countries, the European Commission presented the common European Union risk-based deposit insurance system model in 2015. In this model, the individual risk of each bank should be measured. However, there are discussions in scientific literature that the amount of systemic risk of the banks should be measured. In the current economy it is very important to measure the arising amount of systemic risk in the banking sector, but even the new E.U. common deposit insurance system model of 2015 does not take systemic risk assessment into account. The aim of the research is to evaluate the risk-based common European deposit insurance system impact on deposit insurance premiums to Lithuanian banks: not only individual banks’ risks, but the systemic risk as well. The most appropriate systemic risk assessment method was selected according to different scientific researchers and strong Lithuanian banking sector concentration. The results showed that inclusion of the systemic risk assessment in risk-based deposit insurance system helps to have more accurate bank risk assessment.