Deposits insurance as basis for banking system?s financial sustainability (ABSTRACT)

Irina Vashakmadze

In modern time, commercial banks should turn into a driving instrument by means of which national economy could use extra financial resources as bank credits. This will help a country to come out of financial and economic crisis and provide dynamic growth of national economy.

Given the main function of a bank, it is, on the one hand, a debtor to depositors and on the other ? to creditors. Depositors run the risk of losing funds on their accounts whereas banks take the risk that allocated credits might not be repaid. This contradictory process objectively generates risk, and it is essential to take appropriate measures for its minimization. Creation of deposits protection system is an ideal way for overcoming obstacles.
There is no ready-made deposits protection model to provide banking system’s financial sustainability and, therefore, the country has no experience in using the system. Hence, the article deals with existing deposits protection models of industrially developed countries with a view to choosing an appropriate model and paving the way for practical use of selected model.