University of California, Berkeley. I thank a referee for suggestions that substantially changed the focus of this article. I also thank the editor, René Stulz, for his comments.
Fairly Priced Deposit Insurance and Bank Charter Policy
Article first published online: 30 APR 2012
1995 The American Finance Association
The Journal of Finance
Volume 50, Issue 5, pages 1735–1746, December 1995
How to Cite
CRAINE, R. (1995), Fairly Priced Deposit Insurance and Bank Charter Policy. The Journal of Finance, 50: 1735–1746. doi: 10.1111/j.1540-6261.1995.tb05195.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
The thrust of current deposit insurance reform—risk-based insurance premiums and capital requirements—is an effort to price deposit insurance more fairly. Fairly pricing deposit insurance eliminates inequitable wealth transfers, but it does not lead to an efficient equilibrium. This paper shows that an alternative charter policy results in an efficient separating equilibrium.