Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/269111 
Year of Publication: 
2022
Series/Report no.: 
ECB Working Paper No. 2704
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We present a quantitative model of deposit insurance. We characterize the policymaker's optimal choices of coverage for depositors and premiums raised from banks. Premiums contribute to a deposit insurance fund that lowers taxpayers' resolution cost of bank failures. We find that riskadjusted premiums reduce moral hazard, enabling the policymaker to increase deposit insurance coverage by 3 percentage points and decrease the share of expected annual bank failures from 0.66% to 0.16%. The model predicts a fund-to-covered-deposits ratio that matches the data and declines in taxpayers' income due to taxpayers' risk aversion.
Subjects: 
Deposit Insurance
Bank Runs
Bank Regulation
JEL: 
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-5289-7
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.