Which of the following statements about the FDIC is correct? I. The deposit insurance premiums charged by the FDIC to a member bank fully reflect the riskiness of that bank's assets
II) The manner in which the FDIC is set up helps protect depository institutions from the rigors of true market competition

Question

Quizplus · Accepted Answer

Statement I is incorrect because the FDIC charges a flat percentage of insured deposits as insurance premiums, regardless of the riskiness of the bank's assets. Statement II is correct because the FDIC provides deposit insurance to protect depository institutions from the risk of bank runs and failures, which would be more frequent in a fully competitive banking market.

Which of the Following Statements About the FDIC Is Correct