Deposit insurance protects small banks by removing competition along the dimension of risk: without it, large stable branch banks (like Canadian banks) could win depositors by advertising their stability, but government backing of deposits eliminates that competitive advantage, which is precisely why small banks lobbied for it.

causalpending

Speaker

Charles Calomiris

Evidence Quote

they were correct that if you protected deposits that would remove competition along the dimension of risk

Source

Charles Calomiris on the Financial Crisis 10/26/2009EconTalk
Created: 6/15/2026, 9:20:15 AM

My Notes

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