Did Fdicia Enhance Market Discipline? A Look at Evidence from the Jumbo-Cd Market

Did Fdicia Enhance Market Discipline? A Look at Evidence from the Jumbo-Cd Market

Did Fdicia Enhance Market Discipline? A Look at Evidence from the Jumbo-Cd Market

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) forced uninsured creditors such as jumbo-CD holders to bear more of the losses from bank failures. Because no other federal laws affecting loss exposure took effect in the surrounding years, the Act offers a natural experiment for assessing the supervisory returns from greater reliance on debt markets to police bank risk.

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