Abstract
In this paper, I analyze the regulation aiming at maintaining financial stability composed of the subsystems of bank failure prevention, regulation of bank failure and the deposit insurance system. Firstly, I introduce the various interpretations of financial stability term; secondly, I summarize and discuss the bank failure legislation with special concern on the analysis of deposit insurance efficiency.
Although the positive effect of deposit insurance on financial stability has not been proven uniformly, the overall benefit of the bank failure regulation seems to be the key to financial stability at the financial system withstanded the crisis caused by COVID-19 pandemic very well. Therefore, I evaluate the current regulation positively, though its capability will be tested when the next systematic financial crisis arises.