Sample Statement of Purpose in Finance

The Fall of Silicon Valley Bank, Signature Bank, and Credit Suisse has again raised the debate about the role of central bankers, deposit insurers, and regulators in modern-day banking. World has been through similar or worse instances like Global Financial Crisis, the Asian Financial Crises, and many more. However, in every instance, these financial crises lead us to some new modifications in our regulatory, supervisory, and deposit insurance regimes. Given the precedence, it was in 2008 when Lehman Brothers bank failed in the US, facing long queues of depositors outside the bank.

Luckily, depositors were paid in full, but authorities realized it was time to implement explicit deposit insurance, rather than implicit coverage by Government. Deposit Protection Corporation (DPC) was established under FDIC, to protect unsophisticated depositors and maintain public trust in the financial system. As per December 2022 data, about 98% of depositors in the banking sector are eligible for protection in case their bank fails. Since Corporation started its operations in 2018, there are numerous gaps in policies and effective implementation in relevant fields of the Deposit Protection Framework (DPF) in the US. Being part of the DPC, I find myself obligated in strengthening the DPF.

I started my job as an Assistant Director, in the Policy and Regulations Department, DPC, in 2020. Since my joining, I was entrusted with first-hand projects of periodic Risk-Assessment of member institutions, policies for review and revision of coverage levels for eligible depositors, development of a mechanism for change in the premium calculation, and others. I designed the risk assessment model for weak banks by identifying important indicators for bank performance.

DPC is shifting its premium calculation mechanism from flat to differential premium by 2024. Being the key resource person, I devised the mechanism for differential premium calculation by incorporating idiosyncratic and systemic risks. It required an assessment of financial stability indicators in each performance section i.e., capital section, asset quality, earnings, and liquidity, of banks. My proposed framework consisted of a two-tier assessment methodology composed of, correlation and panel estimation regression models to determine best-fit variables for the idiosyncratic risk factor.

Currently I am working on the systemic risk assessment framework, that will lead us to the cumulative risk scores of member institutions for premium calculation. Furthermore, I presented the policy for the periodic review of coverage level & scope and I was the key resource person in DPC’s first-ever coverage revision from $250,000 to $500,000 in September 2021. However, the scope of coverage and risk assessment at DIS are ever-evolving fields and whenever there is some financial and economic distress e.g., the COVID recession, conflict in Ukraine, or the failure of SVB these policies will be brought into question. Thus, policy development in these deposit insurance aspects requires good research, diagnostics, and estimation analysis.  

My most important project so far is the DPC Act amendments. Enactment of these amendments will transform DPC’s mandate. It was a rigorous process in which our team in coherence with the Federal Reserve, was engaged in technical assistance from the IMF on the upgradation of the Bank Resolution and Recovery Regime. It’s just the beginning of a new era for DPC. A lot more can be envisioned, in the advanced mandate and the emerging role of DPC in bank resolution and crisis management. We need to explore bank resolution strategies, valuation assessments, and simulations of different scenarios. Not holding back on advanced analytical and estimation techniques to improve our policy stance in other areas of the DPF. My academic and professional experience validates that I can provide policy solutions to economic problems, especially as a deposit insurer. I find this an opportunity to advance myself to present optimal policy responses. Also, equip my expertise in evidence-based policy responses, econometrics, advanced analytical skills, financial stability, and macroeconomic linkages. Studying in the US will allow me to dive into advanced expertise in policy response, analytical details, and rigorous research. Apportioning me with an opportunity to interact with the diverse student body in the US and have discernment about global practices.

I believe that on return, I will be able to serve and represent my organization at domestic and international fora. Since I will continue my job in Policy and Regulations Department at DPC, my cultivated skills will foster emerging trends in policy-making practice. This will enable me to effectively contribute to the successful development of the DPF in peace or crisis times.