Deposit insurance and bank risk-taking

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  • dc.contributor.author López-Quiles Centeno, Carolinaca
  • dc.contributor.author Petricek, Maticca
  • dc.date.accessioned 2018-09-18T15:02:31Z
  • dc.date.available 2018-09-18T15:02:31Z
  • dc.date.issued 2018-04
  • dc.description.abstract This paper aims to assess the effect of deposit insurance on the risk-taking behaviour of banks. As shown in the theoretical literature, deposit insurance may induce moral hazard and incentivize banks to take on more risk. In this paper we provide an experimental setup in which we exploit an increase in the coverage limit of deposit insurance in the U.S. in order to identify the difference in risk taking by banks that were affected and banks that were not. This difference comes from the fact that state chartered savings banks in Massachusetts had unlimited deposit insurance coverage at the time when it was increased for all other banks in the US. Given that all banks in the sample are subject to the same regulatory and supervisory requirements, and that they are similar in other characteristics, we can isolate the effect of such increase in deposit insurance. We find, contrary to the literature, that this increase in deposit insurance did not increase bank risk-taking.ca
  • dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
  • dc.format.mimetype application/pdfca
  • dc.identifier.uri http://hdl.handle.net/10230/35460
  • dc.language.iso engca
  • dc.relation.ispartofseries ADEMU Working Paper Series;101
  • dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
  • dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.ca
  • dc.rights.accessRights info:eu-repo/semantics/openAccessca
  • dc.rights.uri https://creativecommons.org/licenses/by/4.0/ca
  • dc.title Deposit insurance and bank risk-takingca
  • dc.type info:eu-repo/semantics/workingPaperca

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