The effects of deposit insurance system on the deposit accumulation: Case of Turkey

03. Summary The title of this study is " The Effects of Deposit Insurance System on the Deposit Accumulation: Case of Turkey" and it aims at testing emprically whether deposit insurance system has an effect on deposit accumulation in Turkish banking sector, and at evaluating moral hazard of this application in terms of depositors. For this purpose, the effect of the deposit insurance, especially full protection introduced in 1994, was tested emprically to see but effect it created on total deposits. In this study, both real total deposits for 3 months covering the terms 1986:1 and 2003:2, general price level of gross national product, exchange rate, nominal interest rate, real interest rate data, and the dummy variables showing the changes made in deposit insurance system within this term were used and the models were predicted by using Ordinary Least Squares and Stepwise models. The findings showed that during the time the full protection was introduced and then lifted, the total deposits in the banking sector increased compared to other times, and following the lifting of full protection, to total deposits in the banking sector decreased. Moreover, it was seen that in the increased of deposits in the banking sector, not only the economic variables but also deposit insurance system were effective. It was also seen that whenever the deposit insurance increase, the individuals put their money to the banks rather than using their money in alternative ways. As a result of this application, it was seen that the individuals were less choosy, for thet are assured by deposit insurance and for these reasons it was concluded increase in the level of deposit insurance brought about moral hazard in terms of depositors. vn