Private deposit insurance, deposit flows, bank lending, and moral hazard

Piotr Danisewicz, Chun Hei Lee, Klaus Schaeck

Research output: Contribution to journalArticleScientificpeer-review

2 Citations (Scopus)


We examine the role of private unlimited deposit insurance as a complement to federal deposit insurance for deposit flows, bank lending, and moral hazard during a crisis. We find that banks whose deposits are federally and privately fully insured obtain more deposits and expand lending, in contrast to banks whose deposits are only federally insured. We also document that privately insured banks remain prudent in the loan origination process during the subprime crisis. Our results offer novel insights into depositor and bank behavior in the presence of multiple deposit insurance schemes with differential design features. They also illustrate how private sector solutions incentivize prudent bank behavior to strengthen the financial safety net.
Original languageEnglish
Article number100967
JournalJournal of Financial Intermediation
Early online dateMar 2022
Publication statusPublished - Oct 2022


  • private unlimited deposit insurance
  • deposit flows
  • lending
  • financial crisis


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