Deposit Safety Insurance - An Institutional Innovation of Bank to Reach Win-Win for Both Customers and Bank

摘要

INTRODUCTION The U.S.A. erupted in an unprecedented economic crisis 1929 when the stock market suddenly crashed due to sudden margin calls. This period is referred to as the Great depression and it lasted for more than five years. During this depression more than 9100 banks in the U.S.A. went bankrupt. This almost led to the complete destruction of the banking system. The reason for the majority of the failures was what are referred to as "runs" on the banks. This is when panic stricken depositors flood into the bank and demand to withdraw all of their deposits immediately. As more banks failed to satisfy customers, the runs increased. The banks had invested the depositors money and so were unable to meet this demand for cash from everyone at once. The more banks that failed in this the greater the panic became. At that time there was no insurance or safety system in place and many depositors lost everything when the banks closed. Following this crisis it became that steps had to be taken to prevent this kind of thing from happening again. Both the banking system and thedepositors needed some sort of safety system.