The Uninsured Deposit Premium

Daniel Dias and Tim Schmidt-Eisenlohr

No 12103, CESifo Working Paper Series from CESifo

Abstract: We estimate the uninsured deposit premium - the difference between the rates paid on uninsured versus insured deposits - by linking observed average deposit rates to an estimated share of uninsured deposits. Using U.S. bank data from 1991 to 2025, we show that the average uninsured deposit premium rose by nearly 400 basis points over this period. This rise reflects both falling insured deposit rates and rising uninsured deposit rates. We find a strong correlation with the monetary policy cycle: a one-percentage-point increase in the Federal Funds Rate corresponds to a rise of roughly 32 basis points in the uninsured deposit premium. We develop a bargaining model between banks, insured depositors, and uninsured depositors that explains these dynamics.

Keywords: uninsured deposits; monetary policy; bank funding; deposit pricing (search for similar items in EconPapers)
JEL-codes: E52 G21 G28 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12103

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