GOVERNMENT PROVISION OF DEPOSIT INSURANCE Definition

Bookmark and Share

GOVERNMENT PROVISION OF DEPOSIT INSURANCE affects banks' demands for deposits and households' (and others') supply of deposits to banks. The banking industry models deposit insurance premiums that banks pay as a fixed share of deposits. As is the case for many government subsidies, the government subsidies attributable to the under-pricing of deposit insurance are likely to be shared with depositors (and bank customers more generally) because that subsidy lowers the cost of providing that insurance. In response to the subsidy, banks raise the deposit interest rates that they pay. In doing so, banks transfer some of the government subsidy to depositors.

Learn new Accounting Terms

BVAL is Business Valuator Accredited for Litigation.

REVALUATION SURPLUS, under the revaluation model, increases in carrying amount above a cost-based measure are recognized as revaluation surplus.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.