Reflections on the Moral Hazard of Deposit Insurance System

The relationship between deposit insurance and moral hazard is an unavoidable problem. However,it will be wrongful to treat the reduction of moral hazard as one of the purposes of deposit insurance system. Although,due consideration should be given to reduce moral hazard,but the basic goal of the deposit insurance system,should be positioned to prevent banking runs.Through the following measures,deposit insurance system would play a role in maintaining financial stability: ensuring that the deposit insurance system should meet the prerequisites,the reasonable design of the deposit insurance system itself,and putting restrictions on incremental amount of moral risk caused by the deposit insurance system.