Deposit insurance in risk prevention in the banking sector: An application on the Turkish banking sector

Today, economic activities have gained a global character in parallel with technological developments. Due to these developments, the time and distance dimensions in transaction flows have been almost zeroed and it has become possible to operate at any time from anywhere in the world. However, this rapid adventure and passability of money, with the effect of contagion, carries the financial crisis in a country to other countries and can take the crisis to global dimensions. In terms of ensuring financial security and stability, it is of great importance to strengthen institutional structures that will fight against crises or to establish a new financial structure. In this respect, the importance of deposit insurance has become even more important as it prevents the attack on banks in a panic environment that may be experienced due to the negativities in the sector and provides the trust of the public and ensures that their savings in banks are secured and will be repaid. In our study, the role and effect of deposit insurance in the prevention of bank-based risks are investigated. For this purpose, established under the 2001-2018 sample period in 21 commercial bank's financial soundness of financial data received from the Banks Association of Turkey database changes in deposit insurance it has been tested in a linear pattern. In other words, it has been investigated how deposit insurance affects "bank risk" in normal and crisis periods According to the findings obtained; It is understood that deposit insurance positively affects financial stability during the normal operating periods of the economy, but it is not sufficient by itself to provide financial stability in times of economic crisis. It is believed that a deposit insurance system, which is supported by the banking sector, which is subjected to effective supervision and supervision, and which will be established by taking into account the conditions of the country as well as the necessary legal regulations, will contribute to the stability of the financial sector.