THE DETERMINATION OF DEPOSIT INSURANCE PREMIUMS WITH A LIMIT COVERAGE

• Main Author: Citra Delima, Anggun
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/76842
• Institution: Institut Teknologi Bandung

Deposit insurance is an important mechanism in protecting bank customers from the risk of bankruptcy and providing a sense of security for their savings. In the economic system, banks play a crucial role as financial institutions that gather funds from the public and channel them as loans to borrowers. However, banks also face risks such as liquidity risk and credit risk, which can disrupt their stability and operational continuity. Bankruptcy of a bank can lead to significant financial losses for customers. Therefore, Deposit insurance provides financial protection for customers in case of bank failures, ensuring they need not worry about losing their deposits. Under deposit insurance, customers will still receive a refund of their funds up to a certain limit determined by the deposit insurance agency. In determining deposit insurance premiums, this study utilizes the Black-Scholes method, considering the protection limits that will affect the level of risk and premiums to be charged to banks or financial institutions. The research also presents the simulation results obtained from the model to examine the relationship between variables and insurance premium values. Based on sensitivity analysis, It is found that the premium value is inversely proportional to the interest rate and directly proportional to the asset price volatility.