19-23 Pricing deposit insurance premiums to reflect increases in risk-taking by financial institutions is one method to reduce incentives to take risks.

Question

Quizplus · Accepted Answer

Pricing deposit insurance premiums to reflect increases in risk-taking by financial institutions can be an effective method to reduce incentives to take risks because if the premiums are higher for riskier behavior, financial institutions will try to reduce their level of risk-taking in order to avoid paying higher premiums. This can help to promote more responsible and sustainable behavior in the financial sector.

19-23 Pricing Deposit Insurance Premiums to Reflect Increases in Risk-Taking