Taiwan established its deposit insurance system in 1985. Participation was voluntary and the scope of operations covered under the system was subject to several limitations. This hampered the ability of the system to clearly differentiate the various risk levels among financial institutions and therefore led to the adoption of a flat premium rate.

Since then, Taiwan's financial sector has liberalized and financial regulatory controls have been relaxed. At the same time the operations of financial institutions have become more diversified and international in scope, widening the differences among such institutions in terms of their levels of risk. These trends have sparked debate over the fairness of the flat rate system and the tendency of the system to lead to moral hazard and encourage financial institutions to assume high levels of risk.

In order to harmonize premium rates with the different levels of risk presented by individual institutions, Central Deposit Insurance Corporation (CDIC) drafted the "Proposal for a Deposit Insurance Risk-based Premium System." This system was formulated on the basis of a broad consensus reached among the business, government and academic sectors and in line with the implementation of the mandatory system of deposit insurance. The proposal was also drafted in accordance with the Deposit Insurance Act and was submitted to Ministry of Finance, which ratified and officially enacted the "Implementation Scheme for the Deposit Insurance Risk-based Premium System" on July 1, 1999. At that time, Taiwan became the first Asian country to implement such a system.