Title

An Evaluation of the Deposit Insurance Subsidization of Australian Banks

Publication Title

Pacific-Basin Finance Journal

Publication Date

11-1996

Document Type

Article

DOI

10.1016/S0927-538X(96)00019-4

Keywords

deposit insurance, australia, banking

Disciplines

Finance and Financial Management

Abstract

To the extent that deposits in Australian banks are guaranteed, Australian banks receive deposit insurance at no cost. This cost is ultimately borne by the taxpayers of Australia. This paper examines the amount of subsidisation using techniques similar to studies of other deposit insurance systems. We show that the estimate for the deposit insurance premium depends critically upon the method of estimating the market value of assets and the asset volatility of the bank. We find that Australian banks received substantial insurance subsidies in 1990, 1991, and 1992.

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