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MIMIC: A proposal for deposit insurance reform

James A. Wilcox (Kruttschnitt Professor of Financial Institutions, Haas School Of Business, U C Berkeley, Berkeley, CA)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Article publication date: 1 April 2001

197

Abstract

Here the author proposes the Mutual Insurance Model with Incentive Compatibility (MIMIC). MIMIC is a model for deposit insurance that mimics the incentives and practices of a private sector, mutual, insurance organisation. The main features of MIMIC are: fully risk‐based premiums, payments by the Federal Deposit Insurance Corporation (FDIC) to the US Treasury Department (the Treasury) for its line of credit and ‘catastrophe insurance’, rebates to banks when the reserve ratio exceeds a risk‐based ceiling, surcharges on banks when the reserve ratio dips below a risk‐based floor, dilution fees on deposit growth to maintain reserve ratio and refunds to banks to maintain reserve ratio when their deposits shrink.

Citation

Wilcox, J.A. (2001), "MIMIC: A proposal for deposit insurance reform", Journal of Financial Regulation and Compliance, Vol. 9 No. 4, pp. 338-349. https://doi.org/10.1108/eb025087

Publisher

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MCB UP Ltd

Copyright © 2001, MCB UP Limited

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