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A Risk-Based Deposit Insurance System

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  • David P. Rochester
  • David A. Walker

Abstract

The assessments and the role for Federal and State deposit insurance funds have been public policy concerns since the banking holiday of 1932 and the Federal Deposit Insurance Act of 1933. … This study provides for adjusting the deposit insurance premium cost to credit a risk-based dividend toward an institution's current insurance premium. Thus, the net or effective insurance premium for each association becomes a risk-based premium. For each S&L, a financial risk index is developed and employed to determine its appropriate dividend. A simple model is developed utilizing only the readily available, and no legislation is required. A dynamic system is also developed for distributing dividends after a risk based system is accepted.

Suggested Citation

  • David P. Rochester & David A. Walker, 1986. "A Risk-Based Deposit Insurance System," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 9(2), pages 1-20.
    • Handle: RePEc:wri:journl:v:9:y:1986:i:2:p:1-20
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