The paper updates IMF staff views on deposit insurance policy issues, which were last comprehensively addressed in 2006 before the global financial crisis and prior to the international standard. Effective deposit insurance systems must be integrated into the financial safety net, have strong governance arrangements, and adequate funding with a public backstop. Coverage should protect most retail deposits and membership must be mandatory for all banks. Funding targets should be informed by expert judgment, and foreign currency deposits should be insured if widely used. The paper recommends that deposit insurance funds should be available to support the resolution of banks (subject to safeguards), enabling prompt depositor compensation and the continuity of depositor services. It also recommends close coordination with resolution authorities and adopting depositor preference. Key challenges include the need for shorter depositor payout timeframes, the evolution of fintech products, and ensuring credible funding arrangements.
Arda et al. (Sun,) studied this question.