Is Fairly Priced Deposit Insurance Possible?

Yuk-Shee Chan (), Stuart I. Greenbaum and Anjan V. Thakor ()
Additional contact information
Stuart I. Greenbaum: Olin School of Business, Washington University

Finance from EconWPA

Abstract: We analyze risk-sensitive, incentive-compatible deposit insurance in the presence of private information and moral hazard. Without deposit-linked subsidies it is impossible to implement risk-sensitive, incentive- compatible deposit insurance pricing in a competitive, deregulared environment, except when the deposit insurer is the least risk averase agent in the economy. We establish this formally in the context of an insurance scheme in which privately informed depository institutions are offered deposit insurance premia contingent on reported capital; the result holds for alternative sorting instruments as well. This suggests a contradiction between deregulation and fairly priced, risk-sensitive deposit insurance.

JEL-codes: G (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ias
Date: 2004-11-10
Note: Type of Document - pdf; pages: 20
View list of references View citations in EconPapers

Downloads: (external link)
http://129.3.20.41/eps/fin/papers/0411/0411018.pdf (application/pdf)

Related works:
Journal Article: Is Fairly Priced Deposit Insurance Possible? (1992)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0411018

Access Statistics for this paper

More papers in Finance from EconWPA
Series data maintained by EconWPA ().