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An empirical note on the impact of federal deposit insurance on bank failures in the U.S

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  • Richard Cebula
  • Willie Belton

Abstract

This study empirically examines the impact of federal deposit insurance coverage on the failure rate of commercial banks in the U.S. over the 1963–91 period. The analysis allows for the potential bank failure rate impact of the growth rate of real GDP, the real prime lending rate, the real cost of funds, and the commercial bank tangible capital-to-asset ratio, while measuring federal deposit insurance coverage as the percentage of deposits at federally insured banks that was covered by federal deposit insurance. The instrumental variables' estimates indicate that the greater the extent of federal deposit insurance coverage, the higher the bank failure rate. Copyright International Atlantic Economic Society 1997

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  • Richard Cebula & Willie Belton, 1997. "An empirical note on the impact of federal deposit insurance on bank failures in the U.S," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 3(3), pages 281-287, August.
    • Handle: RePEc:kap:iaecre:v:3:y:1997:i:3:p:281-287:10.1007/bf02294914
    DOI: 10.1007/BF02294914
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    References listed on IDEAS

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    1. Edward J. Kane, 1985. "The Gathering Crisis in Federal Deposit Insurance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262611856, December.
    2. Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
    3. James R. Barth, 1991. "The Great Savings and Loan Debacle," Books, American Enterprise Institute, number 918256, September.
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