Based on Becker, Kane, Niskanen, and Peltzman's ideas, we develop a model to explain why deposit insurance is adopted even though policymakers are aware of its pitfalls in both theory and practice. In our model, the regulator acts as both a bureaucrat and an entrepreneur to maximize his...

The European banking union has so far lacked its third pillar: a joint insurance fund for bank savings deposits. As the present study shows, this could be a major disadvantage in dealing with the economic impact of the corona pandemic. A scenario in which a wave of corporate insolvencies leads...

In 1993, when this article was originally published, Congress had recently passed the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) to reduce taxpayers' exposure to financial system losses, including their exposure at "too big to fail" financial institutions. In his new...