Banking · Core
Deposit Insurance
Deposit insurance is a public guarantee on eligible deposits up to a cap — a run-stopper that creates moral hazard and a hard cap problem.
Definition
FDIC (US) insures $250k per depositor per ownership category per bank. Above the cap is uninsured and runnable. Ex-post guarantees (2023) rewrite the cap in a crisis. Premia are paid by banks, which is to say by customers and residual holders.
Why it matters
It is why retail deposits are sticky — until they are not, when they sit above the cap or in the wrong entity.
Case
SVB: a huge uninsured share. The run was a WhatsApp meeting. The subsequent systemic exception was the real cap.
How to read it
Uninsured share, sweep arrangements, and whether the guarantee is de jure or hoped-for. The sticker $250k is not always the market’s number.
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