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Fairly Priced Deposit Insurance and Bank Charter Policy
Author(s) -
CRAINE ROGER
Publication year - 1995
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1995.tb05195.x
Subject(s) - deposit insurance , charter , insurance policy , capital (architecture) , business , auto insurance risk selection , economics , actuarial science , monetary economics , general insurance , finance , archaeology , history
The thrust of current deposit insurance reform—risk‐based insurance premiums and capital requirements—is an effort to price deposit insurance more fairly. Fairly pricing deposit insurance eliminates inequitable wealth transfers, but it does not lead to an efficient equilibrium. This paper shows that an alternative charter policy results in an efficient separating equilibrium.