Improving Banking Supervisory Mechanisms

In the OIC Member Countries

implementation. In order to measure power of the deposit insurer, World Bank aggregated

responses from the surveys towards a universal measure, deposit insurer power index. The

deposit insurance index is composed of the following individual questions from the surveys:

(1) Does the deposit insurance agency/fund administrator have the bank intervention

authority as part of its mandate? (2) Does the deposit insurance authority by itself have the

legal power to cancel or revoke deposit insurance for any participating bank? (3) Can the

deposit insurance agency/fund take legal action for violations against laws, regulations, and

bylaws (of the deposit insurance agency) against bank directors or other bank officials? (4)

Has the deposit insurance agency/fund ever taken legal action for violations against laws,

regulations, and bylaws (of the deposit insurance agency) against bank directors or other bank

officials? The values of the deposit insurance index range from 0 to 4, with higher values

indicating more power. Furthermore, we also present the fraction of funding through insured

deposit. Finally, a composed measure for moral hazard is introduced for the selected set of

countries, which is an index including the survey questions: (1) Is deposit insurance funded by

the government, the banks, or both? (2) Do deposit insurance fees charged to banks vary based

on some assessment of risk? (3) Is there formal co-insurance, that is, are depositors only

insured for some percentage of their deposits, either absolutely or above some floor and/or up

to some limit?

Table 24: Deposit Insurance (Selected OIC Countries)

Source: World Bank, Bank Regulation and Supervision Survey

Survey Indonesia Kazakhstan Malaysia Nigeria Pakistan Turkey UAE Saudi Arabia Algeria

Selected OIC

Average

Deposit Insurer

Power

2000 4,00

0,00

2,67 3,00 N/A.

0,00 N/A.

N/A.

1,9

Range 0-4

2003 4,00

2,00

2,67 3,00 N/A.

2,00 N/A.

N/A.

1,00

2,4

2007 2,00

1,00

2,00 3,00 N/A.

0,00 N/A.

N/A.

2,00

1,7

2011 3,00

N/A.

3,00 2,67 N/A.

1,33 N/A.

N/A.

2,5

Funding with

Insured Deposit

2000 N/A.

N/A.

(percentage)

2003 N/A.

N/A.

N/A N/A.

N/A.

37,00 N/A.

N/A.

37,0

2007 64,73

N/A.

18,90 100,00 0,00 N/A.

N/A.

N/A

N/A.

45,9

2011 51,00

N/A.

20,00 N/A.

N/A.

25,00 N/A.

N/A.

32,0

Degree of Moral

Hazard

2000 0,00

N/A.

1,50 N/A.

1,00 N/A.

N/A.

3,00

1,4

Range 0-3

2003 0,00

2,00

N/A.

1,00 N/A.

N/A.

2,00

1,2

2007 1,00

1,00

2,00 1,00 N/A.

1,50 N/A.

N/A.

3,00

1,6

2011 0,00

N/A.

1,00 2,00 N/A.

2,00 N/A.

N/A.

1,3