Abstract
The current crisis in the thrift industry is at least in part the consequence of a flawed deposit insurance system. The deposit insurance contract provides incentives for thrifts to bear risk, especially when they are thinly capitalized, because insurance premiums do not vary with risk. Unless the underlying problem with the pricing of deposit insurance is dealt with as part of the solution to the current crisis, there will undoubtedly be future economic shocks that create future crises. Therefore, risk based premiums and higher capital requirements for high risk investments should be introduced as features of the insurance contract. Efforts by FSLIC to improve monitoring of asset risk are also appropriate.
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© 1989 Kluwer Academic Publishers
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Kormendi, R.C., Bernard, V.L., Pirrong, S.C., Snyder, E.A. (1989). Conclusions. In: Crisis Resolution in the Thrift Industry. Innovations in Financial Markets and Institutions, vol 3. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-0735-5_8
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DOI: https://doi.org/10.1007/978-94-009-0735-5_8
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-010-6815-4
Online ISBN: 978-94-009-0735-5
eBook Packages: Springer Book Archive