A way to potentially mitigate the moral hazard problem caused by deposit insurance is to charge member fees that adjust to the level of risk that the institution undertakes.

Question

Quizplus · Accepted Answer

Charging member fees that adjust according to the level of risk encourages banks to engage in less risky behavior, as higher risk would lead to higher insurance costs, thus mitigating the moral hazard problem associated with deposit insurance.

A Way to Potentially Mitigate the Moral Hazard Problem Caused