What Is the Drawback of Deposit Insurance Facility

question 28

Multiple Choice

What is the drawback of deposit insurance facility?

• A)Even when the DTI is in trouble, the deposit holder has no incentive to run.
• B)DTIs are more likely to increase the liquidity risk on their balance sheets.
• C)Deposit holder's place in line affects his or her ability to obtain their funds.
• D)Deposit insurance does not deter contagious runs and panics.
• E)Deposit holders are less likely to panic if there is a perceived bank solvency problem.

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Definitions:

Ossicles

Small bones; specifically, one of the bones of the tympanic cavity or middle ear.

Membrane

A selective barrier; it allows some things to pass through but stops others. Such membranes can be biological or synthetic.

Iris

The colored part of the eye surrounding the pupil that controls the amount of light entering the eye.

Opening

An aperture or gap that allows access, passage, or a view through something.