Introduction of models for risk-based contribution to deposit quarantee scheme of Republic of Macedonia
Introduction of models for risk-based contribution to deposit quarantee scheme of Republic of Macedonia

Summary/Abstract: Republic of Macedonia can improve its deposit insurance system by introduction of risk based deposit insurance premium system. The purpose of this research is to provide a preliminary quantitative assessment of the impact that the introduction of two risk-based models proposed by European Commission (Single Indicator Model and Multiple Indicators Model) would have on the contributions of the banks in Republic of Macedonia. Results for the Single Indicator Model show that the selection of a single ratio would ignore valuable information on the risk profile of the bank, since the impact on contributions is very different, depending on the indicator selected. The Multiple Indicators Model overcomes the main drawbacks of the Single Indicator Model. First, by considering information from different classes, the aggregated risk coefficient is better at capturing a bank’s overall risk; secondly, numerical experiments show that the variability of the impact on contributions is significantly reduced.

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