Report
1002
Number
Jan 01 1992

Deposit Insurance Reform: A Plan for the Credit Union Movement

The horrendous losses experienced in the Savings and Loan debacle and the more recent revelations of losses facing the banks’ insurance fund have raised major questions about deposit insurance. Professor Edward Kane was asked to examine the issue of “How to design a deposit insurance system that effectively monitors and polices risk-taking by credit unions and still allows them flexibility to expand and adapt to changing financial conditions.”

Professor Kane shows that the National Credit Union Share Insurance Fund is sound and is not plagued with an overhang of actual or potential losses. However, he shows why credit unions should be interested in investigating alternatives to their current form of deposit insurance despite its soundness. Kane develops a broad outline of a deposit insurance system that effectively monitors and polices risk-taking by credit unions and still allows them flexibility to expand and adapt to changing financial conditions.

Report Number 1002