Many policymakers in developing countries have proposed the implementation of a system of deposit insurance simillar to the system that exists in Canada. However, replicating the financial system from one nation may not be successful in other nations due to different economies, politics, histories, etc.

Part 2

Deposit insurance is designed to increase or decrease fears of bank runs and therefore increase or decrease confidence in banks and deposits.

Part 3

However, because depositors may feel that the "safety net" of deposit insurance means they no longer need to supervise banks themselves, asymmetric information in the form of

adverse selection

moral hazard

may

increase

decrease

.