Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88774
Year of Publication: 
2013
Series/Report no.: 
DIW Discussion Papers No. 1347
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
This paper tests whether an increase in insured deposits causes banks to become more risky. We use variation introduced by the U.S. Emergency Economic Stabilization Act in October 2008, which increased the deposit insurance coverage from $100,000 to $250,000 per depositor and bank. For some banks, the amount of insured deposits increased significantly; for others, it was a minor change. Our analysis shows that the more affected banks increase their investments in risky commercial real estate loans and become more risky relative to unaffected banks following the change. This effect is most distinct for affected banks that are low capitalized.
Subjects: 
financial crisis
deposit insurance
bank regulation
JEL: 
G21
G28
Document Type: 
Working Paper

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