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A Reexamination of the Over- (or Under-) Pricing of Deposit Insurance

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Author Info
Pennacchi, George G
Abstract

This study shows how fair deposit insurance premia can be calculated using data on bank stock prices, interest rate movements, and income and balance sheet accounts. Fair insurance premia are estimat ed under the alternative assumptions that the FDIC provides either a "limited-term" (variable rate) or "unlimited-term" insurance cont ract to banks. The paper's results suggest that for nearly all of the large commerical banks in the sample, the actual insurance premium c harged by the FDIC falls between the bounds of fair limited-term and unlimited-term insurance premia. Copyright 1987 by Ohio State University Press.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 19 (1987)
Issue (Month): 3 (August)
Pages: 340-60
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:mcb:jmoncb:v:19:y:1987:i:3:p:340-60

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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  1. William P. Osterberg & James B. Thomson, 1990. "The effect of subordinated debt and surety bonds on banks' cost of capital and on the value of federal deposit insurance," Working Paper 9012, Federal Reserve Bank of Cleveland. [Downloadable!]
  2. Laeven, Luc, 2000. "Banking risks around the world - the implicit safety net subsidy approach," Policy Research Working Paper Series 2473, The World Bank. [Downloadable!]
  3. Elizabeth S. Laderman, 1993. "Determinants of bank versus nonbank competitiveness in short-term business lending," Economic Review, Federal Reserve Bank of San Francisco, pages 17-32. [Downloadable!]
  4. Anthony M. Santomero, 1997. "Deposit Insurance: Do We Need It and Why?," Center for Financial Institutions Working Papers 97-35, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  5. Alan D. Morrison & Lucy White, 2004. "Is Deposit Insurance a Good Thing, and If So, Who Should Pay for It?," OFRC Working Papers Series 2004fe08, Oxford Financial Research Centre. [Downloadable!]
    Other versions:
  6. Richard D. Phillips & J. David Cummins & Franklin Allen, 1996. "Financial Pricing of Insurance in the Multiple Line Insurance Company," Center for Financial Institutions Working Papers 96-09, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  7. Andrew Kuritzkes & Til Schuermann & Scott Weiner, 2002. "Deposit Insurance and Risk Management of the U.S. Banking System: How Much? How Safe? Who Pays?," Center for Financial Institutions Working Papers 02-02, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  8. Laeven, Luc, 2002. "Pricing of deposit insurance," Policy Research Working Paper Series 2871, The World Bank. [Downloadable!]
  9. Asli Demirguc-Kunt & Edward J. Kane & Luc Laeven, 2007. "Determinants of Deposit-Insurance Adoption and Design," NBER Working Papers 12862, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Joseph G. Haubrich, 1994. "Bank diversification: laws and fallacies of large numbers," Working Paper 9417, Federal Reserve Bank of Cleveland. [Downloadable!]
    Other versions:
  11. Richard W. Kopcke, 2000. "Deposit insurance, capital requirements, and financial stability," Working Papers 00-3, Federal Reserve Bank of Boston. [Downloadable!]
  12. Michael C. Keeley, 1989. "The stock price effects of bank holding company securities issuance," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 3-19. [Downloadable!]
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