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Target Funding

In: Deposit Insurance Schemes

Author

Listed:
  • Djurdjica Ognjenovic

Abstract

Target funding is focused on the establishment of the desired level of an ex ante DIF over a medium-term time frame. It is a measure for the DIS’s desired payout capacity and sufficiency. Deposit insurers face challenges when choosing a method for setting and adjusting the target fund size level. If a decision on the target fund size level is made arbitrarily, it ignores the actual riskiness of banks and undermines its potential usage for funding optimization. This chapter introduces the concept of target funding and explains how target funding improves financial management practices and increases awareness on the DIF’s adequacy. It explains the difference among the applied methodologies and discusses how adjustment on annual regular premium should be used in parallel with the approved target fund size methodology.

Suggested Citation

  • Djurdjica Ognjenovic, 2017. "Target Funding," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Deposit Insurance Schemes, chapter 4, pages 157-181, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-319-51143-6_4
    DOI: 10.1007/978-3-319-51143-6_4
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