Passive foreign investment in a nation-state`s financial system allows for more lending when the conditions of the global financial system limit the amount of loanable money. Over the years, in-depth studies have been conducted on the impact of bank deposit guarantee schemes on foreign investment. A bank deposit insurance scheme (for all intents and purposes) ensures that a nation-state will instead have a higher rate of passive foreign investment (within the margin of the insurable amount). The deposit guarantee in Norway is managed by the Norwegian Bank Guarantee Fund (sikringsfond bank fund) and covers deposits up to NOK 2 million. [42] Malaysia introduced its Deposit Guarantee Scheme in September 2005. Malaysia Deposit Insurance Corporation (MDIC) (Malaysian: Perbadanan Insurans Deposit Malaysia (PIDM)) is a legal body established under the Malaysia Deposit Insurance Corporation (Akta Perbadanan Insurans Deposit Malaysia). All commercial and Islamic banks, including foreign banks operating in Malaysia, are mandatory member institutions of PIDM. The maximum coverage limit is RM250,000 per depositor and per member institution. Islamic accounts, community accounts, fiduciary accounts and accounts of sole proprietorships, partnerships or persons engaged in professional practice are insured separately up to the limit of RM250,000. The FDIC does not insure the money you invest in stocks, bonds, investment funds, life insurance, pensions, or municipal securities, even if you purchased these products from an insured bank or savings bank. Deposit guarantee institutions are mostly managed or established by the State and may or may not be part of a country`s central bank, while some private bodies are state-assisted or entirely private. There are a number of countries with more than one deposit guarantee scheme, including Austria, Canada (Ontario & Quebec), Germany, Italy and the United States. This type of bank is called “Fractional Reserve Banking”, since only a small fraction of the total deposits are held as reserves with the bank.

Fractional reserve banking creates additional liquidity in capital markets and helps keep interest rates low, but can also create an unstable banking environment. According to the FDIC, no depositor has lost a penny of insured funds as a result of a bank default since their insurance began on January 1, 1934. Compared to the benefits of preventing bank runs, the FDIC has been a resounding success – the U.S. economy has not experienced a legitimate bank run in more than 80 years of the FDIC. FDIC is an independent authority of the U.S. government that protects against the loss of insured deposits in the event of the failure of a bank or savings bank insured by the FDIC. The FDIC`s deposit guarantee is backed by the full confidence and solvency of the U.S. government. The Bibby plan, which avoids the problem of moral hazard but still prevents bank runs, would lead the state to be safe from deposits, with banks paying the state regular premiums reflecting the extent of deposit insurance. The amount of the deposit guarantee could be the responsibility of the banks and the inherent risk of that particular bank.

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