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

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  • Muhammad Afdi Nizar
  • Alfan Mansur

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.

Suggested Citation

  • Muhammad Afdi Nizar & Alfan Mansur, 2023. "Can the Indonesian banking industry benefit from a risk-based deposit insurance system?," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 16(1), pages 177-196, January.
    • Handle: RePEc:taf:macfem:v:16:y:2023:i:1:p:177-196
    DOI: 10.1080/17520843.2021.1928527
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    1. Adam Triggs & Febrio Kacaribu & Jiao Wang, 2019. "Risks, Resilience, and Reforms: Indonesia’s Financial System in 2019," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 55(1), pages 1-27, January.
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    Cited by:

    1. Kaelo Mpho Ntwaepelo, 2023. "Bank Stability versus Financial Development: A Generous Deposit Insurer's Dilemma," Economics Discussion Papers em-dp2023-09, Department of Economics, University of Reading.

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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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