Proceedings of the 3rd International Conference on Business and Engineering Management (ICONBEM 2022)

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A Literature Review on Risk-Based Premium: Interest Income Versus Moral Hazard

Authors
Geodita Woro Bramanti1, Ninditya Nareswari1, *, Aang Kunaifi2, Muhammad Saiful Hakim3
1Department of Business Management, Institut Teknologi Sepuluh Nopember, Surabaya, Indonesia
2Department of Accounting, Universitas Airlangga, Surabaya, Indonesia
3Department of Finance, National Yunlin University of Science and Technology, Yunlin, Taiwan
*Corresponding author. Email: ninditya@its.ac.id
Corresponding Author
Ninditya Nareswari
Available Online 31 July 2023.
DOI
10.2991/978-94-6463-216-3_23How to use a DOI?
Keywords
bank; banking industry stability; credit risk; interest income; moral hazard; risk-based premium
Abstract

The function of the deposit insurance is to guarantee depositors fund to stabilize the banking industry. However, the higher the percentage of the insurance can increase moral hazard which in the long run causes instability in the banking industry. The application of a risk-based premium and a limited guarantee are expected to reduce moral hazard from both the bank and the customer side. The purpose of this study was to examine the role of deposit insurance institutions in the banking industry, especially the application of risk-based premiums. More specifically, this study analyzes several previous research related to risk-based premiums, bank performance, and moral hazard practices. The results of this study were propositions that explain the effect of risk-based premiums with different time lags. This study also provides several propositions related to the crisis and the interest rate that can be tested empirically in future research. The implication of the study emphasizes that the application of risk-based premiums can stabilize the banking industry in case bank have comprehensive risk management, appropriate interest rate policies, and good economy condition.

Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 3rd International Conference on Business and Engineering Management (ICONBEM 2022)
Series
Advances in Economics, Business and Management Research
Publication Date
31 July 2023
ISBN
10.2991/978-94-6463-216-3_23
ISSN
2352-5428
DOI
10.2991/978-94-6463-216-3_23How to use a DOI?
Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Geodita Woro Bramanti
AU  - Ninditya Nareswari
AU  - Aang Kunaifi
AU  - Muhammad Saiful Hakim
PY  - 2023
DA  - 2023/07/31
TI  - A Literature Review on Risk-Based Premium: Interest Income Versus Moral Hazard
BT  - Proceedings of the 3rd International Conference on Business and Engineering Management (ICONBEM 2022)
PB  - Atlantis Press
SP  - 295
EP  - 304
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-216-3_23
DO  - 10.2991/978-94-6463-216-3_23
ID  - Bramanti2023
ER  -