Bank turmoil does not justify mission creep by deposit insurance
One sales pitch of insurance salespeople has always been: “I don’t sell insurance, I sell peace of mind”. Regulators and central bankers are now spinning similar lines by emphasising the reassuring qualities of higher deposit insurance over its costs.
But localised banking turmoil does not justify mission creep by deposit insurance schemes. For commercial banks and their customers, the detriment would include further erosion of their agency within the financial system. Higher deposit insurance also would increase implicit subsidies to reckless bankers.
This story originally appeared on: Financial Times - Author:Jonathan Guthrie
