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.
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