Banks enter the economy by attracting financial resources in form of deposits on the one hand and injecting monetary resources into the economy through providing facilities on the other hand. So, naturally banks are exposed to economic fluctuations and crisis. Therefore, the possibility always exists that banks are faced with challenges in their activities and this issue will always entail the risk of banks not being able to repay the deposits of depositors, especially in cases of bankruptcy. In addition, in case of mismanagement of credit institutes and banks, possible dangers developed threaten depositors. In such conditions it is necessary to define a mechanism in banking systems to help prevent banks and credit institutes from facing bankruptcy and also to ensure reimbursement of public deposits should the banks go bankrupt or are unable to pay the deposits. In most of the countries in the world, this mechanism is in form of institutions such as funds, trusts or insurance or deposit guarantee agencies.
Deposit guarantee fund provides the strengthening and continuation of financial stability in the country by protecting the financial system against the “bank run” phenomena and by ensuring the existence of security and liquidity of deposits of common depositors. This important factor is the main objective of public policies of creating deposit guarantee system.
In order to prevent banks from bankruptcy and in order to guarantee deposits and to reimburse deposits up to a certain ceiling, these institutions provide a variety of services through collecting membership fees from banks and credit institutes.
This institution, having enough controlling means, such as imposing fines and limiting the activities of faulty financial institutions on one hand and providing necessary resources for repayment of public deposits of the bankrupt institutions on the other hand, has played its role as a powerful supervisor and financial law regulator and has caused development and strengthening of secure financial network in the country. It is necessary to reiterate that a deposit guarantee system in itself cannot protect the banking system. Other components such as legislative system and powerful banking supervision and a financial supporter as a last resort creditor (effective role of central bank) are also necessary as sides of a triangle which have close cooperation with each other.
In Iran, extensive studies were conducted in the central bank over the years regarding establishing a powerful institution in the banking system in order to guarantee deposits which led to codification of article 95 of Iran’s fifth five-year development plan ratified in 2010. According to this law, central bank of Iran is authorized to establish deposit guarantee fund in order to guarantee the repayment of funds belonging to depositors of banks and other credit institutes facing bankruptcy. Iran deposit guarantee fund, in addition to receiving membership fees from banks and credit institutes according to codified rules and regulations, is determined to engage in activities such as ranking the banks and credit institutes through determining their risk levels, and to provide specialized counseling and monitoring of activities of credit institutes in case they face crisis and in situations of bankruptcy, the fund acts on resolving the institute and repaying depositors according to conditions and codified instructions.