77363 the world bank economic review, vol. 15, no. 3 481–490 A New Development Database Deposit Insurance around the World Asli Demirgüç-Kunt and Tolga Sobaci In the past two decades, in a series of banking crises around the world, banks have become systematically insolvent. These crises have occurred in developed and develop- ing economies alike. To make such financial system breakdowns less likely and to limit their costs if they occur, policymakers feel the need for financial safety nets. These in- clude such policies as implicit or explicit deposit insurance, a lender of last resort func- tion of the central bank, bank insolvency resolution procedures, and bank regulation and supervision. Of these policies, explicit deposit insurance has been gaining popu- larity in recent years. Since the 1980s the number of countries with explicit deposit insurance schemes almost tripled, with most oecd countries and an increasing num- ber of developing economies adopting some form of explicit depositor protection. In 1994 deposit insurance became the standard for the newly created single banking market of the European Union. Establishing an explicit deposit insurance scheme became part of the generally accepted best practice advice given to developing economies. I. The Origin of the Database Given the complexities involved in safety-net design and operation, policymakers often request technical assistance from the World Bank, particularly on the de- sign of deposit insurance. Until recently, bank staff were unable to give sound policy advice because of the absence of a cross-country data set on deposit in- surance characteristics and a lack of empirical evidence on how different deposit insurance designs affect banking outcomes. A recent World Bank research project has started to fill this gap by collecting a cross-country data set and using it to develop much-needed empirical evidence (Demirgüç-Kunt and Kane 1998). This article presents this data set on deposit insurance system arrange- ments currently in place around the world. A large section of the data set is con- structed using the survey results of an International Monetary Fund study by Garcia (1999) and earlier sources such as Kyei (1995) and Talley and Mas (1990). Additionally, information from other country sources is also compiled to double- check the data sets. Most of the data are coded through dummy variables to represent the presence or absence of the deposit insurance features. A few other features that are not suitable for binary coding are categorized using a range of Asli Demirgüç-Kunt is Lead Economist of the Development Research Group at the World Bank. His e-mail address is ademirguckunt@worldbank.org. Tolga Sobaci is a student at Harvard University and his e-mail address is tolgasobaci@yahoo.com. © 2001 The International Bank for Reconstruction and Development / THE WORLD BANK 481 482 the world bank economic review, vol. 15, no. 3 numeric values. The main motive for presenting the data in this format is to enable researchers to process the data sets for quantitative analysis using computer applications. The database (a Microsoft® Excel spreadsheet), further details on its construction, including data sources and individual country notes, are avail- able on the Web site www.worldbank.org/research/interests/confs/upcoming/ deposit_insurance/home.htm. II. Features of the Deposit Insurance System Database Table 1 provides information on deposit insurance design features for the 71 countries with explicit schemes. The following section describes deposit insur- ance features and information on the presentation methodology of the database. Explicit or Implicit Deposit Insurance Type. The first variable in the database identifies the form of the deposit insur- ance, whether explicit or implicit. Deposit insurance is explicit if some form of legislation, such as the central bank law, banking law, or the constitution, es- tablishes a guarantee scheme for deposits. In the absence of such formal arrange- ments, we assume that the country has an implicit deposit insurance system. Countries with explicit deposit insurance systems are coded 1, and the other countries are coded 0. The database has information on 178 countries, but the table reports only the design features of 71 explicit schemes. Date enacted or revised. This variable identifies the year in which an ex- plicit deposit insurance system was enacted and the year any revisions were made. Further details are provided in country notes. Coverage Variables Deposit insurance systems vary in the extent and amount of coverage that they provide depositors. The schemes specify the types of deposits, types of institu- tions, and the maximum amount of deposits guaranteed. Extent of coverage. Systems offering coverage to deposits denominated in foreign currencies are coded 1 and systems excluding such deposits are coded 0. Most countries with explicit insurance systems do not extend coverage to inter- bank deposits. Deposit insurance systems extending coverage to interbank de- posits are coded 1 and systems that do not are coded 0. Amount of coverage. The amount of coverage provided by deposit insur- ance schemes varies. The database provides different coverage variables and a variable for the existence of coinsurance arrangements. Coverage limits 1. This variable provides the coverage limits of the insurance schemes that were in effect during the first half of 1999 in U.S. dollars or ECU. Demirgüç-Kunt and Sobaci 483 Coverage ratios. This variable shows the ratio of the coverage limits to 1998 gdp per capita. Coinsurance. This variable is coded 1 if there is coinsurance, and 0 otherwise. Funding Variables Funding type. Deposit insurance schemes fall into two categories in the way they are funded by banks. The most conventional type is the funded system, in which the member institutions make periodic contributions to an established, permanent fund. The alternative type, the unfunded system, has no permanently maintained fund, and members are required to contribute to the fund after a bank failure. Funded systems are coded 1, and unfunded systems are coded 0. Annual premiums. This variable provides the banks’ annual premiums that are applied to the assessment base (generally deposits or insured deposits). If con- tributions are made after banking problems, this is indicated. Risk-adjusted premiums. Banks contribute to the fund by paying periodic premiums at either variable or fixed rates. Risk-adjusted systems are coded 1; fixed premiums are coded 0. Source of funding. In addition to the premiums collected from the banks, most insurance schemes can also resort to public funds when needed. Systems exclusively funded by the banks are coded 0. Systems exclusively funded by public funds are coded 2. Systems with access to both sources are classified as “jointly funded� and coded 1. Administration and Membership Variables Administrative form. Systems administered by official authorities are coded 1, those administered by private authorities are coded 3, and those administered jointly are coded 2. Private administrators typically have limited authority. These are mentioned in the country notes. Type of membership. Membership in deposit insurance systems may be com- pulsory or voluntary. As of spring 1999 a majority of the deposit insurance schemes were compulsory. The compulsory systems are coded 1, and the volun- tary systems are coded 0. III. Concluding Remarks The cross-country database of deposit insurance design features described herein is part of a broader research project to understand the impact of deposit insur- ance design on bank stability, market discipline, and financial development. This database can be used to investigate a wide range of issues including when devel- TABLE 1. Explicit Deposit Insurance Schemes around the World Foreign Interbank Type currencies deposits explicit = 1 Date enacted/ yes = 1 yes = 1 Coverage limits-1 Coverage Country implicit = 0 revised no = 0 no = 0 US$ or ECU ratios Argentina 1 1979/1995 1 0 30,000 3 Austria 1 1979/1996 1 0 $24,075 but 1 coinsurance for businesses Bahrain 1 1993 1 0 5,640 1 Bangladesh 1 1984 0 0 2,123 6 Belgium 1 1974/1995 1 0 15,000 ECU until 1 year 2000 Brazil 1 1995 1 0 17,000 4 Bulgaria 1 1995 1 0 1,784 1 Cameroon 1 1999 0 1 5,336 9 Canada 1 1967 0 1 40,770 2 Central African 1 1999 0 1 3,557 13 Republic Chad 1 1999 0 1 3,557 15 Chile 1 1986 1 0 demand deposits in 1 full and 90% co- insurance to UF 120 of $3,600 for savings deposits Colombia 1 1985 0 1 in full until 2001, 2 then coinsurance to $5,500 Croatia 1 1997 1 0 15,300 3 Czech Republic 1 1994 0 0 coinsurance to 2 $11,756 Denmark 1 1988/1998 1 0 20,000 ECU 1 Dominican Republic 1 1962 1 0 coinsurance to 7 $13,000 Ecuador 1 1999 1 1 in full to year 2001 El Salvador 1 1999 1 0 4,720 2 Equatorial Guinea 1 1999 0 1 3,557 3 Estonia 1 1998 1 0 coinsurance 90% of 0 $1,383, but 20,000 ECU in year 2010 Finland 1 1969/1992/ 1 0 29,435 1 1998 484 Risk- Source of Co- Permanent adjusted funding Administration insurance fund premiums 0 = private official = 1 Membership yes = 1 funded = 1 Annual yes = 1 1 = joint joint = 2 compulsory = 1 no = 0 unfunded = 0 premiums no = 0 2 = public private = 3 voluntary = 0 0 1 risk-based, 1 0 3 1 0.36 to 0.72 1 0 pro rata, ex post 0 1 3 1 0 0 ex post 0 0 2 1 0 1 0.005 0 1 1 1 0 1 0.02 + 0.04 0 1 2 1 0 1 0.3 0 0 3 1 0 1 risk-based to 0.5 1 1 2 1 0 1 risk-based: 0.15% of 1 1 2 0 deposits + 0.5% of net non-performing loans 0 1 0.33 max 0 1 1 1 0 1 risk-based: 0.15% of 1 1 2 0 deposits + 0.5% of net nonperforming loans 0 1 risk-based: 0.15% of 1 1 2 0 deposits + 0.5% of net nonperforming loans 1 0 none 0 2 1 1 1 1 0.3 0 0 1 1 0 1 0.8 0 1 2 1 1 1 commercial banks 0.5, 0 1 1 1 savings banks 0.1 0 1 0.2 (maximum) 0 1 2 1 1 1 0.1875 0 1 2 0 0 1 0.65 0 n.a. 1 1 0 1 risk-based, 0.1 to 0.3 1 1 1 1 0 1 risk-based: 0.15% of 1 1 2 0 deposits + 0.5% of net nonperforming loans 1 1 0.5 (maximum) 0 1 2 1 0 1 risk-based: 0.05 to 0.3 1 1 3 1 (continued) 485 TABLE 1. (continued) Foreign Interbank Type currencies deposits explicit = 1 Date enacted/ yes = 1 yes = 1 Coverage limits-1 Coverage Country implicit = 0 revised no = 0 no = 0 US$ or ECU ratios France 1 1980/1995 1 0 65,387 3 Gabon 1 1999 0 1 5,336 1 Germany 1 1966/1969/ 1 0 private: 30% of 1 1998 capital; official coinsurance 90% to 20,000 ECU Gibraltar 1 1998 1 n.a. lesser of 90% coinsurance or 20,000 ECU Greece 1 1993/1995 1 0 20,000 ECU 2 Hungary 1 1993 1 0 4,165 ECU or 1 $4,564 Iceland 1 1985/1996 1 0 20,000 ECU 1 India 1 1961 1 0 2,355 6 Indonesia 1 1998 Blanket guarantee Ireland 1 1989/1995 1 0 coinsurance 90% to 1 15,000 ECU Italy 1 1987/1996 1 0 125,000 6 Jamaica 1 1998 1 0 5,512 2 Japan 1 1971 0 0 $71,000, but in full until March 2001 Kenya 1 1985 1 1 1,750 5 Korea 1 1996 0 0 $14,600, but in full 0 until 2000 Latvia 1 1998 1 0 $830 until 2000 0 Lebanon 1 1967 0 1 3,300 1 Lithuania 1 1996 1 0 $6,250 then 2 coinsurance Luxembourg 1 1989 1 0 coinsurance 90% to 0 ECU 15,000 through 1999, then to ECU 20,000 Macedonia 1 1996 1 0 coinsurance 75% to 0 $183 Malaysia 1 1998 Blanket guarantee Marshall Islands 1 1975 1 1 100,000 Mexico 1 1986/1990 1 1 in full except sub- ordinated debt until 2005 Micronesia 1 1963 1 1 100,000 Netherlands 1 1979/1995 1 0 20,000 ECU 1 486 Risk- Source of Co- Permanent adjusted funding Administration insurance fund premiums 0 = private official = 1 Membership yes = 1 funded = 1 Annual yes = 1 1 = joint joint = 2 compulsory = 1 no = 0 unfunded = 0 premiums no = 0 2 = public private = 3 voluntary = 0 0 0 on demand but limited 0 0 3 1 0 1 risk-based: 0.15% 1 1 2 0 deposits + 0.5% of net nonperforming loans 1 1 official is 0.03 but can 0 0 3 1 be doubled 1 0 administrative expenses 0 0 2 1 and ex post contributions 0 1 decreasing by size: 0 0 2 1 1.250 to 0.025 0 1 risk-based to 0.3 1 1 2 1 1 1 0.15 0 0 1 1 0 1 0.05 0 1 1 1 1 1 0.2 0 0 1 1 0 0 risk-adjusted ex post 1 1 2 1 0.4 to 0.8 0 1 0.1 0 1 1 1 0 1 0.0048 + 0.036 0 1 2 1 0 1 0.15 0 1 1 1 1 0.05 0 1 1 1 0 1 0.3 0 1 1 1 0 1 0.05 0 1 2 1 1 1 1.5 0 1 1 1 1 0 ex post 0 0 3 1 1 1 1.5%, risk-based 1% 1 1 2 0 to 5% 0 1 risk-based, 0.00 to 0.27 1 0 1 0 0 1 0.3 (max 0.5) plus 0.7 0 1 1 1 as needed 0 1 risk-based, 0.00 to 0.27 1 0 1 0 0 0 ex post 0 1 1 1 (continued) 487 TABLE 1. (continued) Foreign Interbank Type currencies deposits explicit = 1 Date enacted/ yes = 1 yes = 1 Coverage limits-1 Coverage Country implicit = 0 revised no = 0 no = 0 US$ or ECU ratios Nigeria 1 1988/1989 0 1 $588 (at market 2 exchange rate), $2,435 (at official exchange rate) Norway 1 1961/1997 1 0 260,800 8 Oman 1 1995 1 0 Coinsurance 75% to 9 $52,630 Peru 1 1992 1 0 21,160 9 Philippines 1 1963 1 1 2,375 3 Poland 1 1995 1 0 1,000 ECU, then 90% 0 coinsurance for the next 4,000 ECU Portugal 1 1992/1995 1 0 15,000 ECU, co- 1 insurance to 45,000 ECU Congo, Rep. 1 1999 0 1 3,557 5 Romania 1 1996 1 0 3,600 2 Slovak Republic 1 1996 1 0 7,900 2 Spain 1 1977/1996 1 0 15,000 ECU through 1 1999, then 20,000 ECU Sri Lanka 1 1987 0 0 1,470 2 Sweden 1 1996 1 0 28,663 ECU, $31,412 1 Switzerland 1 1984/1993 0 0 19,700 1 Taiwan, China 1 1985 0 0 38,500 3 Tanzania 1 1994 0 0 376 2 Thailand 1 1997 Blanket guarantee Trinidad and 1 1986 1 1 7,957 2 Tobago Turkey 1 1983 1 0 in full Uganda 1 1994 0 0 2,310 8 Ukraine 1 1998 1 0 250 0 United Kingdom 1 1982/1995 1 0 Larger of 90% co- 1 insurance to $33,333 or 22,222 ECU United States 1 1934/1991 1 1 100,000 3 Venezuela, RB de 1 1985 0 0 7,309 2 Source: Demirgüç-Kunt and Sobaci 2000. 488 Risk- Source of Co- Permanent adjusted funding Administration insurance fund premiums 0 = private official = 1 Membership yes = 1 funded = 1 Annual yes = 1 1 = joint joint = 2 compulsory = 1 no = 0 unfunded = 0 premiums no = 0 2 = public private = 3 voluntary = 0 0 1 0.9375 0 1 1 1 0 1 0.005 of assets and 0 1 3 1 0.01 of total deposits 1 1 0.02 0 1 1 1 0 1 risk-based from 0.65 to 1 1 2 1 1.45 0 1 0.2 0 1 1 1 1 1 not more than 0.4 0 1 1 1 1 1 risk-based, 0.08 to 0.12 1 1 1 1 + more in emergencies 0 1 risk based: 0.15% of 1 1 2 0 deposits + 0.5% of net nonperforming loans 0 1 risk-based: 0.3 to 0.6 1 1 2 1 0 1 0.1 to 0.3 for banks 0 1 2 1 0 1 maximum of 0.2 0 1 2 1 0 1 0.15 0 1 1 0 0 1 risk-based, 0.5 now, 1 1 1 1 0.1 later (future date is not available) 0 0 on demand 0 0 3 0 0 1 0.015 0 1 1 0 0 1 0.1 0 1 3 1 0 1 0.2 0 1 1 1 0 1 risk-based 1.0 to 1.2 1 1 1 1 0 1 0.2 0 1 1 1 0 1 0.5 plus special charges 0 1 1 1 1 0 on demand 0 0 3 1 0 1 risk-based, 0.00 to 0.27 1 1 1 1 0 1 2 0 1 1 1 489 490 the world bank economic review, vol. 15, no. 3 oping countries should adopt explicit insurance schemes and how these schemes should be designed (see Demirgüç-Kunt and Detragiache 2000; Demirgüç-Kunt and Huizinga 2000; Cull and others 2000; Kane 2000). References The word “processed� describes informally reproduced works that may not be commonly available through library systems. Cull, Robert, Lemma W. Senbet, and Marco Sorge. 2000. “Deposit Insurance and Fi- nancial Development.� World Bank, Development Economics Research Group, Wash- ington, D.C. Available online at www.worldbank.org/research/interest/confs/upcom- ing/deposit_insurance/home.htm. Demirgüç-Kunt, Asli, and Edward J. Kane. 1998. “Deposit Insurance: Issues of Principle, Design and Implementation.� Research Proposal. World Bank, Development Econom- ics Research Group, Washington, D.C. Processed. Demirgüç-Kunt, Asli, and Enrica Detragiache. 2000. “Does Deposit Insurance Increase Banking System Stability? An Empirical Investigation.� World Bank, Development Economics Research Group, Washington, D.C. Available online at www.worldbank.org/ research/interest/confs/upcoming/deposit_insurance/home.htm. Demirgüç-Kunt, Asli, and Harry Huizinga. 2000. “Market Discipline and Financial Safety Net Design.� World Bank, Development Economics Research Group, Washington, D.C. Available online at www.worldbank.org/research/interest/confs/upcoming/ deposit_insurance/home.htm. Demirgüç-Kunt, Asli, and Tolga Sobaci. 2000. “Deposit Insurance around the World: A Database.� World Bank, Development Economics Research Group, Washington, D.C. Available online at www.worldbank.org/research/interest/confs/upcoming/ deposit_insurance/home.htm. Garcia, Gillian. 1999. “Deposit Insurance: A Survey of Actual and Best Practices.� imf Working Paper 99/54. International Monetary Fund, Washington, D.C. Kane, Edward J. 2000. “Designing Financial Safety Nets to Fit Country Circumstances.� World Bank, Development Economics Research Group, Washington, D.C. Available online at www.worldbank.org/research/interest/confs/upcoming/deposit_insurance/ home.htm. 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