Risk-based deposit insurance premiums have recently been __________ and this is expected to __________ the moral hazard problem of deposit insurance.

Question

Quizplus · Accepted Answer

Risk-based deposit insurance premiums have been established to address the moral hazard problem of deposit insurance. By charging higher premiums to riskier banks, these banks will have an incentive to engage in safer practices to lower their premiums. This helps alleviate the moral hazard problem, where banks take on excessive risk because they know they are insured by the government.

Risk-Based Deposit Insurance Premiums Have Recently Been __________ and This