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Economic Commentary

Alternative Methods for Assessing Risk-Based Deposit-Insurance Premiums

One of the most widely debated topics in the political arena is the proposal to give the Federal Deposit Insurance Corporation (FDIC) the power to vary the cost of deposit-insurance on the basis of risk. The FDIC was created in 1933 and today is considered an integral part of the federal banking safety net whose purpose is to protect the savings and transactions balances of small savers and to help stabilize the banking system. Federally-insured banks currently pay a flat fee for the FDIC guarantee of the first $100,000 of each deposit account in the bank. Critics do not think this is fair or efficient because banks that take excessive risks with their depositor’s money pay exactly the same rate for FDIC insurance as banks that are more conservative in their operations.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit clevelandfed.org for updates.

Suggested Citation

Thomson, James B. 1986. “Alternative Methods for Assessing Risk-Based Deposit-Insurance Premiums.” Federal Reserve Bank of Cleveland, Economic Commentary 9/15/1986.

This work by Federal Reserve Bank of Cleveland is licensed under Creative Commons Attribution-NonCommercial 4.0 International