If regulators provide more protection against bank runs, the incidence of moral hazard is likely to increase.

Question

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Bank runs occur when many depositors withdraw their money from a bank at the same time due to fears about the bank's solvency. When regulators provide more protection against bank runs, such as through deposit insurance or lender of last resort facilities, depositors may feel less need to monitor the bank's risk-taking behavior. This can create a moral hazard problem, as banks may be more likely to engage in risky behavior if they know they are protected from the consequences of a bank run.

If Regulators Provide More Protection Against Bank Runs, the Incidence