Reciprocal brokered deposits, bank risk, and recent deposit insurance policy

Guo Li, Sherrill Shaffer

    Research output: Contribution to journalArticle

    Abstract

    This study provides new evidence regarding reciprocal brokered deposits (RBDs), regulatory responses, and bank risk, contributing to prior studies in four ways. First, using updated financial Call Report data and bank failure data through 2012, we re-examine the moral hazard hypothesis that banks using RBDs exhibit higher risk. Second, we uncover a previously overlooked positive association between RBDs and banks' cost of failure. Third, we apply Granger causality tests; and finally, we test whether the FDIC's recent revision of its pricing discourages the use of RBDs and weakens its association with bank risk. The findings provide a more precise and nuanced understanding of banks' use of RBDs.
    Original languageEnglish
    Pages (from-to)366-384
    JournalNorth American Journal of Economics and Finance
    Volume33
    DOIs
    Publication statusPublished - 2015

    Fingerprint Dive into the research topics of 'Reciprocal brokered deposits, bank risk, and recent deposit insurance policy'. Together they form a unique fingerprint.

    Cite this