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The consumer survey graph from the paper shows that only 1 percent of the depositors knew the correct limit of compensation. About 85% of the people did not know the correct limits provided to them, 15 % of them had thought they were been provided with unlimited compensation and 4 % felt there was no compensation provide to them during the failure of banks. Even if the safety net was provided to the public, poor awareness on the existing system can result in bank runs.

Another chart below from the paper also show about 80% of the account holders do not remember the compensation limit given to their deposits which was informed to them when they open their account. The chart shows only 2-3% have a clear knowledge on the compensation limit. When the consumers lack knowledge on the scheme, it is very difficult for a system to work effectively. The depositors will run on the bank even if his deposits are protected.

With this survey published in the papers survey clearly indicates the consumer had a poor knowledge and awareness on the system. So the lack of knowledge was a reason for the system playing an ineffective role during the Crisis.

3.3 COMPLEXITY OF THE MODEL

According to study from bank of International Settlements and Financial Stability forum, Deposit insurance system will be more effective only if the consumers understand the benefits and limitations of the existing deposit insurance system. The system can work well only when the consumer understand it well. The system had different layer of cover so the consumers was not convinced about the system. The Northern Rock bank at the time of the bank run has faced huge difficulties in explaining the system to the consumers. The depositors did not understand how co-insurance worked. They also concluded it will take a long period of time to claim their deposits (HM Treasury report). The system it is not easy for the general public to understand during the time of financial crisis and panics. The safety net arrangement is to reduce the fear of public at the time of crisis. When the consumers are not able to understand the model then the deposit insurance will not be able to contribute financial stability. The complexity of the model was another reason for failure of the system.

4. EFFECTIVE MODEL OF DEPOSIT INSURANCE

A very good model of deposit insurance will contribute to financial stability. Designing a good本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。