Using a model for pricing deposit guarantees that treats the bank's investments as a portfolio of default-free bonds and risky loans, the authors push back uncertainty to the level of the borrowing firm and thus are able to explore how factors like firm leverage, loan maturity, and correlation...

An analysis of the collapse of the Rhode Island Share and Deposit Indemnity Corp., focusing on distinguishing the elements of failure that it shared with other large state-chartered deposit insurance funds (principally the Ohio and Maryland funds) from those that were unique to Rhode Island.

An investigation of the effects of interest rate and credit risk on optimal capital structure and investment decisions. The authors show that with no uncertainty in interest rates, capital regulation will reduce the risk of the bank's assets, but that under interest rate uncertainty, the impact...

An argument that information about the value of the deposit-insurance guarantee is available from market-generated data.

Most models of deposit insurance assume that the volatility of a bank's assets is exogenously provided. Although this framework allows the impact of volatility on bankruptcy costs and deposit insurance subsidies to be explored, it is static and does not incorporate the fact that equityholders...

The impacts of deposit insurance and forbearance on the costs and value of uninsured deposits and equity capital are shown under three regimes.

An examination of the impact of increased capital requirements on bank portfolio behavior, finding that although the variance of earnings and the incentive to increase leverage are reduced with risk- and leverage-related interest rates, the impact of increased capital requirements on portfolio...

Risk-based capital (RBC) is an important component of deposit insurance reform. This paper provides an empirical analysis of the new 1992 RBC bank standards, applying them to data on virtually all U.S. banks from 1982 to 1989. The data reveal strong associations between several measures of...

An analysis of the investment decisions of a bank whose deposits are fully insured under fixed-rate insurance, showing how banks dynamically adjust their investment portfolios in response to market information and how this flexibility affects both investment decisions and the fair cost of...

This paper examines two proposals to correct the risk-taking incentives embedded in the current deposit insurance system and to provide protection to the deposit insurance fund. the first would require banks to issue subordinated debt, and the second would require bank stockholders to post...