Creation on an effective deposit insurance system in Mongolia

This article deals with some aspects to Mongolian financial systems and law (Guarantee of Deposit in bank). Because from 2008‐10 decline deposit 20% per month. Most banks take high liquidity risk. So our government issued law “Guarantee of Deposit in bank”. It was implicit deposit insurance. This law made financial stability or instability. Therefore 2 banks run. Because government takes 100% risk, a well‐designed deposit insurance system will provide incentives for citizens to keep the financial systems and poor designed deposit insurance system can foster a financial instability. The paper is divided as following:Conceptual frame work about Deposit insurance systems and Bank run International deposit insurance system Legal environment about deposit guarantee in Mongolia How to establish effective deposit insurance systems Variants and ideas suggested by author are attracting among researchers, politicians and other wide range of people. So our country must establish effective deposit insurance system.