One solution mandated by the U.S. Congress for the FDIC was to tie the size of government insurance premiums charged an issued bank directly to the amount of risk taken on. Thus, the risk exposure to the insurance fund becomes the determinant of the insurance paid by private financial institutions.

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This approach incentivizes banks to manage their risk exposure carefully, as higher risk would lead to higher insurance premiums, aligning the cost of insurance more closely with the level of risk a bank poses to the FDIC fund.

One Solution Mandated by the U