金融作业Deakin MAF202.docx

1、金融作业Deakin MAF202Letter of Transmittal To those who are concerned about the report,This is an oversea students paper work related to deposit insurance within the financial institutions all over the world. With the development of the work, three countries are selected to support the authors ideas of

2、deposit insurance. To fully connect with the current economic issue, an additional discussion in terms of the necessity of deposit insurance is carried out with some tentative recommendations and suggestions at the closure of the work.If those who are concerned about the report have any suggestion o

3、r recommendation, they can write to me based on the E-mail address: jhtan.au Sincerely yours,Jian H Tan Table of ContentsExecutive Summary 3Introduction 4Deposit Insurance for Financial Institutions 5The Guarantee in Australia 6Deposit Insurance in Iceland and New Zealand 7Critics on the Necessity o

4、f A Depsoti Insurance 8Tentative Recommendations and Suggestions 9Conclusion 9References 11Deposit Insurance for Financial institutionsExecutive SummaryWith the overwhelming tendency of globalization, the financial activities universally are much more frequent than ever before, which accordingly add

5、s more risks to the financial organizations and afterwards endangers the investors capital including the ordinary peoples savings. This paper is to be unfolded with the focus on deposit insurance for financial institutions. With an in-depth analysis and discussion of the deposit insurance situations

6、 in Australia, Iceland and New Zealand, the author expects to better the audience understandings of the effects of deposit insurance. Given the current situation of our economy, critics on necessity of deposit insurance will be fully provided. At the closure of the paper, some tentative recommendati

7、ons and suggestions in terms of deposit insurance will be offered. Introduction The existence of economy is originated from exchange activities. With the frequency of exchanging activities is greatly going up, some failed business activities will be fresh memories for the losers, especially when suc

8、h a nightmare experience happens in the field of financial institutions, the involvers will be expanded and the impact will be worse, for they are dealing with money most of which has been collected after all. Situations can be even worse, for with the overwhelming development of globalization, the

9、economy is connected closely to each other. Once there is something wrong in a specific place, then a butterfly effect may go around the world. The worldwide financial crisis of 2008 is the best proof. As a result, the insurance related to financial activities can never be more strengthened. The rep

10、ort is to be unfolded from the perspective of deposit insurance of financial institutions. To some financial institutions, deposit is the source of their capital and motive of doing any business. Thereby, financial institutions tend to try their best to drive in as much deposit as they can. However,

11、 the deposit insurance is not operated well in the absolute majority of financial institutions. Though some principles have been formulated within the financial industry and related laws and acts have been issued, some of the financial institutions cannot deny the temptation of great profits at a hi

12、gh risk hid behind. Financial crisis took place one after another every other year in the modern times, which were all related to financial insurance, deposit insurance in particular (Howard 2010 & Jackson 2010). There is a necessity, as a result, to fully analyze the deposit insurance. The report i

13、s to develop the authors ideas on the deposit insurance with the help of an in-depth analysis of three countries, Australia, Iceland, New Zealand in the field based on the previous scholars constructive researches. With the development of the report, the author aims to better the audience understand

14、ing of the current economic situation with the help of critics on the necessity of deposit insurance. At the closure of the report, some tentative suggestions and recommendations will be offered to the financial institutions and investors as far as the current economic situation is concerned. Deposi

15、t Insurance for Financial institutions A stable financial system is favorable to help promote growth in economic activities, which is also a blessing for our sustainable development. A stable financial system can offer smooth flow of funds between savers and investors due to the participation of fin

16、ancial intermediaries, markets and market infrastructure. However, such a stable financial system is hard to establish and keep. Instable financial system, instead, can have potentially damage implications for the real economy. As a result, it is a forward looking task to keep financial stability, w

17、hich requires the participants, the financial institutions in particular to identify vulnerabilities within the financial system and where possible take mitigating action. One of the vulnerabilities is related to deposit. Vulnerable deposit can lead to more vulnerable economic situation, and even an

18、 uncontrollable financial crisis. As a result, great importance has been attached to deposit insurance. According, three influential countries in the world have been selected as our cases to study the financial management within financial institutions from the perspective of deposit insurance, that

19、is, Australia, Iceland and New Zealand to see whether the deposit insurance has been playing an important part in the economic vulnerability. Explicit deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a banks inability

20、to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability. It takes on different forms in different countries but play similar parts in financial institutions (Geroge 2000, Ronald 1996 & David 2006). The Guarantee in Aus

21、tralia Australia has been doing a good job in the economic field and playing a leading part in the globalization. However, the deeper the economy is going, the more risks tend to appear. Despite their relatively good performance, Australia banks did not escape from the slump because of the acute unc

22、ertainty about the health of the global banking system that was greatly affected by the collapse of Lehman Brothers in September 2008. Such uncertainty resulted in pressures on the cost and access to the funding, for more capital market investors and depositors tend not to trust the current financia

23、l institutions, because in their mind, a bank of great influence all over the world has just collapsed, and the collected money were gone. They felt unsafe for their money in the bank. Depositors faith in banks was dropping. They were unsure about the economy. However, the government as well as the

24、financial institutions was so eager to get out of the slump. They needed money. But the depositors did not want to put their money in the banks. In addition, the government actually was dread that financial institutions in Australia would go the same way with the Lehman Brothers. Thereby, the Austra

25、lia Government announced guarantee arrangements for deposits and wholesale borrowing, following similar announcements in some other countries. With the announcement, the government hopes that on the one hand, more depositors would like to deposit their money in the banks to activate the countrys eco

26、nomy with reassurance, and on the other hand, the arrangements can limit the financial institutions to drive in legal deposit so that the Australia economy will grow healthily and get out of the crisis. However, the arrangements do bring about some adverse effects to the Australia economy. A bank gu

27、arantee is an instrument which business partners can use to strengthen and secure an obligation in their contract (Agasha 2003). It aims to be beneficial to the depositors or capital investors, but the guarantees can induce excessive gearing and lead to the incorrect measurement of cost of capital.

28、In addition, some financial sectors may make false guarantee to take a risk to gain more profits. Such guarantees can have adverse effects by creating an incentive to default. Because banks in Australia need guarantees, more illegal collection of money among the investors may arise. This will defini

29、tely endanger the countrys healthy economic growth and development. In order to prevent such illegal and endangering actions happening, the monitoring management should be strengthened and more educational work should be distributed upon the investors in order to lead them to healthy investment. Dep

30、osit Insurance in Iceland and New Zealand During this global financial crisis of 2008, Iceland and the UK can be concluded the most traumatized countries in the world, Iceland in particular. The financial system was almost destroyed in Iceland. People in Iceland had no faith in their economy and ban

31、ks. They were on the edge of desperation base on the investigation of House of Commons Treasury Committee (2009). However, deposit insurance in Iceland was handled by Depositors and Investors Guarantee Fund and covered a minimum of 20,887 euros. Though the number was still insufficient to cover the

32、bank failures of 2008 Icelandic financial crisis, it did exert some positive effects. To some extent, the case in Iceland shows the limits of deposit insurance in protecting against systemic failure. Thereby, the poor deposit insurance is not the only factor leading to financial crisis, but the good management of deposit insurance is to a great extent to prevent the great damage produced by financial crises. As a closer neighbor to Australia, New Zealand, a member of EU, was greatly impacted by the financial crisis of 2008. The government has announced that an opt-in scheme for retail