1. Introduction

Under the deposit insurance system, financial institutions pay insurance premiums to the Deposit Insurance Corporation of Japan (DICJ) and the DICJ protects depositors by such measures as making a certain amount of insurance payout, thereby maintaining the stability of the financial system in the event of a failure of a financial institution1.

After the bubble economy collapsed, the number of failed financial institutions increased, so from FY1996, a temporary measure was taken to protect deposits, etc. in full. The DICJ provided financial assistance (monetary grants) totaling just under 19 trillion yen to cope with the repeated failure of financial institutions (within insurance payout cost: 7.5 trillion yen (paid from the General Account); exceeding insurance payout cost: 11.4 trillion yen)2.

At that time, the deposit insurance premium rate which had remained at 0.012% from FY19863 was raised to 0.048% from FY1996. Between FY1996 and FY2001, a special insurance premium (premium rate: 0.036%) was introduced. After the special insurance premium was abolished, the deposit insurance premium rate (effective rate) remained unchanged from 0.084%4.

Under these conditions, 1) regarding the Special Operations Account from which financial assistance in excess of the insurance payout cost was provided (this account was closed at the end of FY2002), special insurance premium revenues amounted to 1.2 trillion yen only, and thus government spending in excess of 10 trillion yen was made5; and 2) as for the general account, the retained loss exceeded 4 trillion yen6 at its peak (at the end of FY2002) and persisted for a long time thereafter.

At the end of FY2010, the retained loss of the deposit insurance fund (liability reserve) was eliminated for the first time in 15 years, and the liability reserve amounted to approximately 0.1 trillion yen (137.3 billion yen). At present, the liability reserve as of the end of FY2011 is estimated to be approximately 0.4 trillion yen.

Under these circumstances, the Study Group on Deposit Insurance Premium Rates has discussed such issues as the desirable deposit insurance premium rates and liability reserve in future from the medium- and long-term perspectives, and summarized the discussions as follows.


  1. If a financial institution (covered by deposit insurance) fails, the DICJ protects, in principle, insured deposits (which are deposits, etc. actually protected within the pre-determined limit; that is, under the current system, the whole amount of deposits for payment and settlement purposes, and the principal not exceeding 10 million yen of general deposits, etc. and related interest accruing to the date of failure for each depositor, etc. for each financial institution) out of deposits, etc. that fall within the scope of a deposit insurance system (eligible deposits) by making insurance payout to depositors, etc. (the insurance payout method), or by providing financial assistance to a supporting financial institution which takes over the business of the failed financial institution (the financial assistance method) (in the past, the financial assistance method has been taken from the viewpoints such as minimizing disorder after a bank failure; the insurance payout method has never been used).
  2. Insurance payout cost means the estimated cost that would be necessary if the insurance payout is made by the DICJ for insured deposits in the resolution of a failed financial institution. The general account of the DICJ is used to pay expenses within the insurance payout cost, including the case of providing financial assistance (monetary grant) in the resolution of the failed financial institution.
  3. The amount of deposit insurance premiums to be paid by a financial institution is calculated by multiplying the amount of eligible deposits (including specified settlement obligations) by the deposit insurance premium rate. The total of eligible deposits for FY 2010 amounts to approximately 834 trillion yen, and the total of insured deposits is estimated to be approximately 650 trillion yen (without name-based aggregations of deposits). The DICJ’s insurance premium revenues for FY2010 were 679.4 billion yen.
  4. A report titled the “Deposit Insurance System and the Resolution of Financial Institutions after Expiration of the Exceptional Measures” (December 1999), by the Financial System Council, described “in discussing the level of the deposit insurance premium rate after expiration of the exceptional measure for full protection of deposits, it is important to note that, first, it is necessary to repay the borrowings of the general account as early as possible, and also to accumulate a certain level of liability reserve for the future, in response to public confidence in the deposit insurance system.
    The current deposit insurance premium rate is set at a level that is seven times larger than the level up to FY1995 (including special insurance premium) due to expenses needed for special operations and financial conditions of financial institutions, etc. However, the level of the deposit insurance premium rate after the expiration of special measures should be reviewed based on the current level from the viewpoints such as promptly repaying borrowings of the General Account.”
  5. Compensation bonds totaling 10,432.6 billion yen were redeemed. The profit on the collection of non-performing loans which were purchased by the Resolution and Collection Corporation (RCC) from failed financial institutions in the past shall be paid to Government. The amount of such gain totaled 876.2 billion yen during the period from FY2003 to the end of December 2011, and was sent to the national treasury.
  6. Including the deficit of the Special Operations Account when the account was abolished (at the end of FY2002)

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