Limited Deposit Insurance Coverage and Bank Competition

Posted: 9 Jul 2021

See all articles by Oz Shy

Oz Shy

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Rune Stenbacka

affiliation not provided to SSRN

Vladimir Yankov

Board of Governors of the Federal Reserve System

Multiple version iconThere are 5 versions of this paper

Date Written: August, 2014

Abstract

Deposit insurance schemes in many countries place a limit on the coverage of deposits in each bank. However, no limits are placed on the number of accounts held with different banks. Therefore, under limited deposit insurance, some consumers open accounts with different banks to achieve higher or full deposit insurance coverage. We compare three regimes of deposit insurance: No deposit insurance, unlimited deposit insurance, and limited deposit insurance. We show that limited deposit insurance weakens competition among banks and reduces total welfare relative to no or unlimited deposit insurance.

JEL Classification: G21

Suggested Citation

Shy, Oz and Stenbacka, Rune and Yankov, Vladimir, Limited Deposit Insurance Coverage and Bank Competition (August, 2014). FEDS Working Paper No. 2014-53, Available at SSRN: https://ssrn.com/abstract=3882330

Oz Shy (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

HOME PAGE: http://www.frbatlanta.org/research/economists/shy-oz.aspx?panel=1

Rune Stenbacka

affiliation not provided to SSRN

No Address Available

Vladimir Yankov

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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