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Private deposit insurance, deposit flows, bank lending, and moral hazard

Part of the AFL Virtual Research Seminar Series.

  • 25 Nov 2020, 11.00am to 25 Nov 2020, 12.15pm GMT
  • This is an online event.
  • This event is free

Prof Klaus Schaeck, University of Bristol, will discuss his paper:


We examine the role of private deposit insurance for deposit flows, bank lending, and moral hazard during a financial crisis. We present novel evidence that banks headquartered in Massachusetts whose deposits are federally and privately insured obtain more deposits, expand lending, and originate less risky mortgages during the subprime crisis, in contrast to banks whose deposits are only federally insured. The deposit inflows are particularly pronounced prior to the increase of the federal deposit insurance limit and the introduction of the Transaction Account Guarantee Program. Our results highlight a role for private sector solutions in the financial safety net

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