Deposit insurance systems prevent systemic banking panics
the verdict
SUPPORTED
the evidence backs this
confidence 79/100
Deposit insurance systems are widely recognized in financial economics and policy literature as an effective mechanism for preventing systemic banking panics by protecting depositors from losses, though they can introduce moral hazard concerns.
Evidence for · 2
Liquidity Provision vs. Deposit Insurance: Preventing Bank Panics Without Moral Hazard
2001 · cited by 4
The paper explicitly notes that deposit insurance is designed to prevent bank runs, even though it highlights a trade-off with moral hazard.
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More for · 1
11B. Report from the Federal Deposit Insurance Corporation: National Deposit Insurance Has Worked to Promote Banking Stability
1997 · cited by 0
The report outlines how national deposit insurance has functioned historically to promote banking stability and prevent panics.