The development of a reliable deposit insurance system is of crucial importance for Ukraine, since it can help to achieve important goals of economic policy: the enhancement of public confidence in the financial sector, the prevention of bank runs, attracting household deposits, lowering the deposit interest rate, and, hence, decreasing the cost of crediting and increasing investment. Although the framework of the Ukrainian deposit insurance system was designed rather well for the starting phase of it’s functioning, we argue that now it should be developed further. Otherwise it will not be able to promote financial stability in full extend.
In this paper we suggest measures, which should make the deposit insurance fund in Ukraine more efficient and allow it to give momentum to the development of financial intermediation. Our major suggestions concern the funds’ capital and the system of deposit coverage. We advise to legally define a target for DIS capital and to capitalize it with NBU contributions, adjust premiums according to the riskiness of commercial banks, introduce coinsurance and gradually raise coverage of deposits.
