The Depositor Behind the Discipline: A Micro-Level Case Study of Hamilton Bank
FDIC Center For Financial Research Working Paper No. 2005-07
29 Pages Posted: 10 Jun 2005
Date Written: June 2005
Though uninsured depositors are recognized as a source of market discipline, the possible disciplinary effect of decisions made by fully insured depositors have gone largely unexamined. Using proprietary administrative deposit data at the account level, this paper analyzes depositor behavior at a recently failed institution. The results suggest that although uninsured deposits exited at a greater rate than insured deposits, the vast majority of deposits withdrawn were fully insured. Among types of deposit accounts, the rates of withdrawal for fully insured individual, joint, and trust accounts were relatively high. Uninsured business account owners were highly sensitive to the bank's deteriorating condition. In contrast, owners of uninsured individual retirement accounts effectively exerted no market discipline.
Keywords: Depositor discipline, account types, uninsured, insured
JEL Classification: G20, G21, G28
Suggested Citation: Suggested Citation