Bank customers in the United States know that their bank deposits are insured. They can rest assured that their insured savings are safe. And in preventing banking panics, deposit insurance helps to keep the payments system operating. In recent years, we have seen financial crises in Asia and Latin America - crises that, in part, have led at least 31 countries to institute new explicit deposit insurance programs during the 1990s. The benefits of deposit insurance are appreciated worldwide.
Deposit insurance is a simple idea - with profound results.
First and most important, the deposit insurance system must help maintain public confidence while shielding taxpayers from the costs that can arise from deposit insurance. Second, deposit insurance should help the industry through bad times - that is what insurance companies do. Next, deposit insurance must not alter the rational development of the industry over time. Finally, the system must be fair. These concerns are fairly easy to state, but difficult to address.