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Economic Commentary

Economic Principles and Deposit-Insurance Reform

The current system of federal deposit insurance subsidizes risk-taking by depository institutions, resulting in increased failure-resolution costs and decreased efficiency for the entire financial system. Reforms to the deposit-insurance system should consider both the policy objectives and the attendant economic consequences and costs of deposit guarantees.

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. 1989. “Economic Principles and Deposit-Insurance Reform.” Federal Reserve Bank of Cleveland, Economic Commentary 5/15/1989.

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