How is the cost of a systemic risk exemption to the least-cost resolution of bank failures shared among banks?

Question

Quizplus · Accepted Answer

The cost of a systemic risk exemption is shared among banks through additional deposit insurance premiums. The premiums are imposed on FIs based on their size, measured by total deposits and borrowed funds excluding subordinated debt. This means that larger FIs will pay more in premiums than smaller ones, reflecting their greater potential impact on systemic stability. This approach is considered more fair than sharing the cost equally among all insured banks or based on profits earned during the year.

How Is the Cost of a Systemic Risk Exemption to the Least-Cost