The meaning of money - bank regulation - deposit Insurance

3 important questions on The meaning of money - bank regulation - deposit Insurance

What does the depositor insurance actually pay?

  • A maximum amout upto 100,000
  • per depsoitor
  • per insure categor
    • chequing ,
    • savings,
    • term deposits with maturity less years.

What do we call the guarantee by the federal government that depositors will be paid even if the bank cant come up with the funds up to a maximum amount per account?

We call the deposit insurance

What is the other function of the insurance? How?

  • It also eliminates the main reason for banks runs.
  • since depositors know their funds are safe even if the banks fails, they have no incentive to rush to pull them out because of a rumour that the banks is in trouble

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