Volume II - PDF - International Association of Deposit Insurers

•BACKGROUND DOCUMENTS•
Part II: Outreach
Keynote Speaker
Mr. J. P. Sabourin, President and Chief Executive Officer of the Canada Deposit Insurance Corporation
(CDIC) and Chairman of the Financial Stability Forum’s Working Group on Deposit Insurance, gave the
keynote address. He began by thanking the Federal Reserve Bank of Chicago for hosting the conference and
his colleagues from the Working Group who had traveled from around the world to participate in the
event. This conference, he said, provided an important opportunity for a dialogue between deposit insurance
practitioners and those in the academic community who had given considerable thought to deposit
insurance issues.
The Working Group’s Chairman said that the Asian crisis and Russian meltdown had emphasized the interdependence
of financial markets around the world and had removed any doubts about the need for global
mechanisms to foster financial stability. While globalization had been driven by the private sector, there was
a role for the public sector to ensure that economic growth was durable and stable. In response, the G7
finance ministers and central bankers had established the Financial Stability Forum in February 1999.
Among its other activities, the FSF set up a Study Group on Deposit Insurance in November 1999. That
Group was now the Working Group on Deposit Insurance, which included deposit insurers, central
bankers, and supervisors from 12 countries, plus representatives of the FSF, IMF and World Bank.
Mr. Sabourin stated that, while the group was charged with developing practical guidance on deposit insurance,
it would not set standards or best practices to be imposed on emerging markets nor would it question
whether a country should initiate a system of deposit insurance—”that was for others to decide.” He
observed that the group’s goal was to provide guidance to newly established systems and to act as a clearinghouse
for information, viewpoints, experiences, and lessons learned. The group had held meetings for its
members and, through , European Bank for Reconstruction and Development, the Inter-American
Development Bank, the Financial Stability Institute, and the Bank for International Settlements, it had also
held outreach sessions attended by over 200 senior executives from more than 95 countries. The group’s
research team, headed by George Hanc of the FDIC, planned to write 16 issue papers on guidance topics.
Four of the issue papers were on the conference agenda and were open to public comment. 2 While guidance
would be developed by August 2001, deposit insurers, no doubt, would continue to meet afterwards,
to exchange ideas and experiences, and to face new challenges.
Mr. Sabourin regretted the separation between the academic world concerned with theoretical, long-term
issues facing countries with sophisticated markets operating in a developed framework and the imperfect
world facing deposit insurance practitioners. He invited the academic community to look again at what is
actually happening in countries around the world and he called on practitioners to learn from those who
had studied financial systems and safety nets. Mr. Sabourin said that he looked forward to hearing
academic views on containing moral hazard, the rationale behind the issuance of subordinated debt,
designing risk-based premiums, and funding deposit insurance coverage. He also anticipated hearing
recommendations to consider market value accounting and minimize reliance on the safety net. He called
for additional academic research that would help developing countries contain moral hazard, provide
an analytical and an empirical base for setting risk-based insurance premiums, and choose among their
funding options.
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Guidance for Developing Effective Deposit Insurance Systems: Volume II