Article ID Journal Published Year Pages File Type
5088206 Journal of Banking & Finance 2016 14 Pages PDF
Abstract
Deposit insurance designs in many countries place a limit on the coverage of deposits in each bank. However, no limits are placed on the number of accounts held with different banks. Therefore, under limited deposit insurance, some consumers open accounts with different banks to achieve higher or full deposit insurance coverage. We compare three regimes of deposit insurance: no deposit insurance, unlimited deposit insurance, and limited deposit insurance. We show that limited deposit insurance weakens competition among banks and reduces total welfare relative to no or unlimited deposit insurance.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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