The Impact of Uninsured Deposit Rate on the Deposit Insurance Pricing

In a system of deposit insurance with a coverage,the commercial bank's deposit can be divided into two parts: The first part is insured deposit which is given by risk less rate,the other is uninsured deposit which is given by a rate including risk premium.The higher uninsured deposit rate increases the cost of bank's capital and makes the bank vulnerable to be insolvent.On the other hand,the increase of uninsured deposit will decline the weight of insured deposit on the total debt in deposit insurance' maturity,make the depositor of insured deposit in a disadvantage.Based on the Merton model,this paper analyzed the influence mentioned above by developing a model including the variable,uninsured deposit rate,and find that the higher of the risk price,the more remarkable this influence will be.