Reciprocal Brokered Deposits, Bank Risk, and Recent Deposit Insurance Policy

Guo Li and Sherrill Shaffer

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This study provides new evidence regarding reciprocal brokered deposits (RBDs), regulatory responses, and bank risk, contributing to prior studies in four ways. First, using updated financial Call Report data and bank failure data through 2012, we reexamine the moral hazard hypothesis that banks using RBDs exhibit higher risk. Second, we uncover a previously overlooked positive association between RBDs and banks’ cost of failure. Third, we apply Granger causality tests; and finally, we test whether the FDIC’s recent revision of its pricing discourages the use of RBDs and weakens its association with bank risk.

Keywords: Reciprocal Brokered Deposits; Moral Hazard; cost of failure (search for similar items in EconPapers)
JEL-codes: G21 G22 G28 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2014-07
New Economics Papers: this item is included in nep-ban, nep-cba and nep-cta
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Related works:
Journal Article: Reciprocal brokered deposits, bank risk, and recent deposit insurance policy (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2014-56

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