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2017 | OriginalPaper | Chapter

4. Target Funding

Author : Djurdjica Ognjenovic

Published in: Deposit Insurance Schemes

Publisher: Springer International Publishing

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Abstract

Target funding is focused on the establishment of the desired level of an ex ante DIF over a medium-term time frame. It is a measure for the DIS’s desired payout capacity and sufficiency. Deposit insurers face challenges when choosing a method for setting and adjusting the target fund size level. If a decision on the target fund size level is made arbitrarily, it ignores the actual riskiness of banks and undermines its potential usage for funding optimization.

This chapter introduces the concept of target funding and explains how target funding improves financial management practices and increases awareness on the DIF’s adequacy. It explains the difference among the applied methodologies and discusses how adjustment on annual regular premium should be used in parallel with the approved target fund size methodology.

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previous chapter Challenges of Funding a DIS

next chapter Optimized Funding

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Title: Target Funding
Author: Djurdjica Ognjenovic
Publisher: Springer International Publishing
Book: Deposit Insurance Schemes
Print ISBN: 978-3-319-51142-9

Electronic ISBN: 978-3-319-51143-6

Copyright Year: 2017
DOI: https://doi.org/10.1007/978-3-319-51143-6_4