Deposit Insurance Reform in Belarus: Remedy or Threat for the Banking System?

The transformation of private savers' funds into business loans through the banking system is weak in Belarus compared with other Eastern European economies. High concentration, governmental interference, an inconsistent regulation, and a difficult business environment characterise the banks' situation. In order to attract more savings, a reform of the deposit insurance system is presently under discussion. This is expected to contribute to economic growth and development. But deposit insurance, especially when established in a weak institutional environment, can unfold multifarious moral-hazard effects. This paper analyses whether the proposed deposit insurance system is likely to improve the present situation and how it could be better adjusted to the country's situation.