Bailing Out (Firms') Uninsured Deposits: A Quantitative Analysis
September 28, 2026
Summary
The authors document new stylized facts about uninsured deposits. They also find higher benefit for increasing deposit insurance for households' deposits relative to firms' deposits and show that reducing bailouts increases bank failures due to runs and generates severe macroeconomic effects.
View PaperWorking Paper 2026-16
Abstract: We document two novel stylized facts about uninsured deposits and bank failures: (i) firms hold more uninsured deposits than households, and (ii) uninsured depositors do not suffer losses in 94 percent of bank failures. We construct a quantitative general equilibrium model designed around these facts. We characterize the marginal benefits of increased insurance for firms' and households' deposits separately, finding higher benefits for household insurance. Quantitatively, the welfare gains from increasing insurance arise primarily from the reduction in bank runs driven by the higher limit on households' deposits. Reducing bailouts increases bank failures due to runs and generates severe macroeconomic effects.
JEL classification: E20, G21, G28, G32
Key words: uninsured deposits, deposit insurance, bailouts, firms’ deposits, households’ deposits
https://doi.org/10.29338/wp2026-16
Aaron Pancost is with the McCombs School of Business at the University of Texas. Roberto Robatto is with the Research Department in the Federal Reserve Bank of Atlanta. The authors thank Vadim Elenev (discussant), Eduardo Dávila (discussant), Tetiana Davydiuk (discussant), Kinda Hachem (discussant), Uday Rajan (discussant), Daniel Neuhann, and Andrey Ordin for helpful conversations, as well as seminar participants at the Bank of Canada, the 2023 UT Dallas Fall Finance conference, the University of Texas at Austin McCombs School of Business, the 2023 Wharton Conference on Liquidity and Financial Fragility, the 2024 MFA annual meeting, the 2024 Texas Finance Festival, the Cowles Foundation "Rethinking Optimal Deposit Insurance" conference, the FDIC, the Federal Reserve Bank of Philadelphia, the Federal Reserve Board, the 2024 SED meeting, the Federal Reserve Bank of Atlanta, and the Federal Reserve Bank of Chicago. Deheng Xu provided outstanding research assistance. Any remaining errors are the authors'. The views expressed here are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Atlanta or the Federal Reserve System.
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