<p>There's additional information in <a href="https://economics.stackexchange.com/a/5332/264">this answer</a>, but in the US, banks pay into the FDIC <a href="https://www.fdic.gov/deposit/insurance/" rel="nofollow noreferrer">Deposit Insurance Fund</a>, and regulation and capital requirements are used to stop banks from taking excessive risks with deposits. In the event of a bank failure, depositors below the insured limit are repaid in full, but equity-holders are generally wiped out and other creditors must often take losses as well. </p>

<p>The DIF premiums do vary somewhat with risk (see page 2 <a href="https://www.fdic.gov/deposit/insurance/assuringconfidence.pdf" rel="nofollow noreferrer">here</a>):</p>

<blockquote>
  <p>The FDIC charges premiums based upon
  the risk that the insured bank poses, and it inspects, or examines, banks to further manage that
  risk.</p>
</blockquote>

CC BY-SA 3.0
2015-06-22T17:26:10.567Z
2015-06-22T17:26:10.567Z
2017-04-13T12:51:38.253Z
dismalscience
<p>Under <a href="https://en.wikipedia.org/wiki/Deposit_insurance" rel="nofollow">deposit insurance</a>, if my bank goes bankrupt, the government reimburses my deposit up to a specified maximum.</p>

<p>Do banks pay for this insurance, and does it depend on their risk-taking?  If not, what is to stop banks from taking very high risks with deposits from private citizens (the ones unimportant enough to be below the threshold), knowing that the government takes the risk (and will likely opt to rescue the bank rather than repay all account-holders, should the bank fail)?</p>

<p>(Relevant: <a href="http://positivemoney.org/2013/05/two-main-problems-with-deposit-insurance/" rel="nofollow"><em>two main problems with deposit insurance</em></a>)</p>

CC BY-SA 4.0
2020-08-16T16:50:26.863Z
Relevant: [Who pays the premium for bank deposit insurance?](https://money.stackexchange.com/q/126631)
Flux
<banking>
Do banks pay for deposit insurance?
gerrit
# Do banks pay for deposit insurance?

(Asked by: username_0 on 2015-06-22)

Under [deposit insurance](https://en.wikipedia.org/wiki/Deposit_insurance), if my bank goes bankrupt, the government reimburses my deposit up to a specified maximum.

Do banks pay for this insurance, and does it depend on their risk-taking? If not, what is to stop banks from taking very high risks with deposits from private citizens (the ones unimportant enough to be below the threshold), knowing that the government takes the risk (and will likely opt to rescue the bank rather than repay all account-holders, should the bank fail)?

(Relevant: [*two main problems with deposit insurance*](http://positivemoney.org/2013/05/two-main-problems-with-deposit-insurance/))

**Tags:** banking

> **Comments:**
> **username_1**: Relevant: [Who pays the premium for bank deposit insurance?](https://money.stackexchange.com/q/126631)  

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## 1 answers

### Answer by username_2 on 2015-06-22. Score: 4 | Accepted answer

There's additional information in [this answer](https://economics.stackexchange.com/a/5332/264), but in the US, banks pay into the FDIC [Deposit Insurance Fund](https://www.fdic.gov/deposit/insurance/), and regulation and capital requirements are used to stop banks from taking excessive risks with deposits. In the event of a bank failure, depositors below the insured limit are repaid in full, but equity-holders are generally wiped out and other creditors must often take losses as well.

The DIF premiums do vary somewhat with risk (see page 2 [here](https://www.fdic.gov/deposit/insurance/assuringconfidence.pdf)):

> The FDIC charges premiums based upon
> the risk that the insured bank poses, and it inspects, or examines, banks to further manage that
> risk.


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