Risk-based capital supports risk-based deposit insurance premiums by increasing the cost risk taking for DTI stockholders.

Question

Quizplus · Accepted Answer

Risk-based capital requires financial institutions to hold more capital based on the level of risks they undertake. This increases the cost of risk-taking for stockholders, which can lead to more conservative and responsible decision-making. As a result, it supports the idea of risk-based deposit insurance premiums, which charges higher premiums to institutions with higher risk profiles.

Risk-Based Capital Supports Risk-Based Deposit Insurance Premiums by Increasing the Cost