Independent institution or cooperative institution? China’s deposit insurance institution model and the Honey Badger Algorithm

Abstract

In the context of public deposit insurance organizational models, several interesting questions arise: Why does China's Deposit Insurance Corporation consistently lean toward the cooperative institution model, which is closely aligned with the central bank? Despite fervent advocacy for the independent institution model by the IADI and the U.S. Why does the unwavering stance exist? Is the choice of the cooperative institution model an "ignorant solution" or an "optimal solution" in China? Our work answers these questions for the first time, and we argue that it is the "optimal solution" that policymakers can choose after careful deliberation, not due to stupidity or inexperience. Based on the Honey Badger Algorithm, real options approach and expected loss pricing model, our work verifies the significant advantages of the cooperative institution model over the independent institution model in China. This pivotal distinction, primarily overlooked in the extant literature, suggests that universally accepted perspectives may not be ubiquitously relevant across all national contexts.