Double the Insurance, Double the Funds?
38 Pages Posted: 13 Oct 2020
Date Written: August 8, 2020
The Depositors Insurance Fund and Share Insurance Fund, private organizations in Massachusetts, have provided a full guarantee on deposits held at Massachusetts state-chartered savings and cooperative institutions since 1934. I instrument for the choice to participate in these funds and find that member institutions held on average between 31.7% to 35.5% more deposits over the Federal Deposit Insurance Corporation limit when compared to similar state institutions. In addition, I find that member institutions experienced on average an additional 12% larger flight to deposits than nonmember institutions during the financial crisis. These results show that private deposit insurance might lessen concerns of deposit loss and reduce the burden on federal guarantee programs.
Keywords: deposits, deposit insurance, Depositors Insurance Fund, Share Insurance Fund, Federal Deposit Insurance Corporation
JEL Classification: G21, G28, G01
Suggested Citation: Suggested Citation