On dominant deposit insurance system's impact on the risk of moral hazard

The establishment of a deposit insurance system to protect the interests of depositors, because the buffer depositors in the banking liquidity worries and the Bank Runs. However, deposit insurance and any other insurance, there are moral hazard problem. Through the empirical analysis of the implementation of deposit insurance in Indonesia after the impact of the risk of moral hazard, the results show that implementation of the deposit insurance system dominance to a certain extent, the Indonesian banking sector to reduce the risk of moral hazard.

Key words: deposit insurance; the risk of moral hazard; franchise value; uninsured creditors