Moral Hazard and Adverse Selection :Problem in the Process of the Deposit Insurance System

As one of three finance safe net,the Deposit Insurance System has always being disturbed by asymmetric information since it was established.Furthermore,the Deposit Insurance System is doubted by the authorities in many countries because of moral hazard and adverse selection.Today,the Deposit Insurance System will be brought into action in China.In order to reduce its disadvantages and enforce its action successfully,this paper deeply illustrates how moral hazard and adverse selection become the institutional deficiency of the Deposit Insurance System from the standpoint of the economics of information and insurance.