Many developing countries have been adversely affected by incidents of economic shocks caused by financial instability which has retarded economic growth. The impact of financial instability explains why the financial sector is regarded as significant tool in the economic development of any country. In an effort to ensure that the stability of the financial system is sustained, many countries have strengthened regulatory and supervisory frameworks to ensure that banks operate within a stable economic environment. In addition, many countries have set up deposit insurance systems in order to complement the prudential supervision and regulation by the Central Banks as well as the lender-of last-resort function of the central bank. Nonetheless, the introduction of deposit insurance has not only contributed positively in the maintenance of the financial system, but has presented challenges as well. This could be discerned from the negative consequences which deposit insurance systems suffer such as moral hazard and adverse selection. The aforementioned problems have been addressed by making proper considerations in the process of choosing the proper deposit insurance model. However, it is pertinent to indicate that there is no model which could be recommended as the best since each model is suitable for the particular circumstances of a given country. However, an explicit deposit insurance system has been proposed as the model for the best practice deposit insurance systems and has since been endorsed by the International Monetary Fund (IMF) for countries which are in the process of setting up such a system. Explicit deposit insurance system is preferred over other forms since it creates certainty that bank depositors are guaranteed reimbursement in the event of bank failure, has clearly defined iii guidelines on the extent to which they are covered against loss occasioned by bank failure as well as saving the government from diverting the national budget to bail out distressed banks for purposes of facilitating reimbursement of depositors and thereby sustaining stability within the financial system and economic system. It is against this background that the position of Lesotho, in so far as the role played by deposit insurance within the banking system was explored
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uct/oai:localhost:11427/36795 |
| Date | 01 September 2022 |
| Creators | Letsie, Shoaepane |
| Contributors | Rycroft, Alan |
| Publisher | Faculty of Law, Department of Commercial Law |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Master Thesis, Masters, LLM |
| Format | application/pdf |
Page generated in 0.0018 seconds