Private Deposit Insurance, Deposit Flows, and Bank Lending

81 Pages Posted: 15 Aug 2019 Last revised: 18 Dec 2020

See all articles by Piotr Danisewicz

Piotr Danisewicz

University of Bristol

chun hei lee

University of Bristol

Klaus Schaeck

University of Bristol

Date Written: December 18, 2020


We examine the role of private deposit insurance as a complement to federal deposit insurance for deposit flows, bank lending, and moral hazard during a financial crisis. We show that banks whose deposits are federally and privately insured obtain more deposits, expand lending, and remain prudent in the mortgage origination process during the subprime crisis, in contrast to banks whose deposits are only federally insured. Deposit inflows are stronger prior to the increase of the federal deposit insurance limit and introduction of the Transaction Account Guarantee Program. Our results highlight a role for private sector solutions in the safety net.

Keywords: private deposit insurance, deposit flows, lending, financial crisis

JEL Classification: G21, G28

Suggested Citation

Danisewicz, Piotr and lee, chun hei and Schaeck, Klaus, Private Deposit Insurance, Deposit Flows, and Bank Lending (December 18, 2020). Available at SSRN: or

Piotr Danisewicz

University of Bristol ( email )

School of Economics, Finance and Management
The Priory Road Complex
Bristol, BS8 1TU
United Kingdom

Chun hei Lee

University of Bristol ( email )

United Kingdom

Klaus Schaeck (Contact Author)

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

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