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

See all articles by Andrew M. Davenport

Andrew M. Davenport

Federal Deposit Insurance Corporation (FDIC)

Kathleen McDill

Federal Deposit Insurance Corporation (FDIC)

Date Written: June 2005

Abstract

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suggest that although uninsured deposits exited at a greater rate than insured deposits, the vast majority of deposits withdrawn were fully insured.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

Davenport, Andrew M. and McDill, Kathleen, The Depositor Behind the Discipline: A Micro-Level Case Study of Hamilton Bank (June 2005). FDIC Center For Financial Research Working Paper No. 2005-07, Available at SSRN: https://ssrn.com/abstract=740296 or http://dx.doi.org/10.2139/ssrn.740296

Andrew M. Davenport (Contact Author)

Federal Deposit Insurance Corporation (FDIC) ( email )

550 17th Street NW
Washington, DC 20429
United States

Kathleen McDill

Federal Deposit Insurance Corporation (FDIC) ( email )

550 17th Street NW
Washington, DC 20429
United States
202-898-3705 (Phone)

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