On deposit insurance system under condition of information asymmetry

Asymmetric information, which is defined that there are differences in knowledge of information for each parties of contract, exists in economic activities extensively. Furthermore, moral hazard and adverse selection are a pair of inevitable outcomes of asymmetric information. Since the deposit insurance system was established in western countries, it had always been disturbed by asymmetric-information. And the deposit insurance system is doubted by the authorities in many countries because of moral hazard and adverse selection.