After the collapse of SME Bank in Namibia, the Bank of Namibia was delegated to expedite the establishment of the new institution called Namibia Deposit Guarantee Authority (NDGA). NDGA is aimed at protecting depositors in the event of a bank failure; however, some economists argue that NDGA will increase the problem of moral hazard in the banking industry. Discuss the merit and demerit of this concern, and offers solutions

how the problem of moral hazard could be mitigated. (25 marks)

3 Question 2 After the collapse of SME Bank in Namibia, the Bani: of Namibia was delegated to expedite the establishment of the new institution called Namibia Deposit Guarantee Authority(NDGA). NDGA is aimed at protecting depositors in the event of a bank failure; however, some economists argue that NDGA will increase the problem of moral hazard in the banking industry. Discuss the merit and demerit of this ooneern, and oEers solutions how the problem of moral hazard could be mitigated. {25 marks}|