"FDIC-Sponsored Self-Insured Depositors: Using Insurance to Gain Market Discipline and Lower the Cost of Bank Funding"

Insured depositors have no reason to care how their banks perform or how safe they are. Only uninsured depositors have that incentive. This paper offers a plan to replace some insured deposits with uninsured deposits. The plan: the FDIC would guarantee loan contracts if the loan takers deposited the proceeds exclusively in uninsured deposits and backed those deposits with equity. This would ensure that the loan takers could share the likely costs if any of their depositories failed. The loans made under FDIC guarantee would only require interest at the risk-free rate. Thus the loan takers could offer the proceeds at lower rates than the rates paid on current deposits. Accordingly, funding by banks would shift to the new deposits, and since the new "self-insured" depositors would have equity at stake, they would have no choice but to duly monitor their banks and impose rate premiums based on each bank's indigenous risk. With these reforms, some very costly imperfections of current deposit insurance would be eliminated: the FDIC would now have in place a program that would dissuade banks from moral hazard and high risk and set the foundation for better disciplined, safer, and more cost-efficient banking.

FDIC-sponsored self-insured depositors: using insurance to gain market discipline and lower the cost of bank funding

Insured depositors have no reason to care how their banks perform or how safe they are. Only uninsured depositors have that incentive. This paper offers a plan to replace some insured deposits with uninsured deposits. The plan: the FDIC would guarantee loan contracts if the loan takers deposited the proceeds exclusively in uninsured deposits and backed those deposits with equity. This would ensure that the loan takers could share the likely costs if any of their depositories failed. The loans made under FDIC guarantee would only require interest at the risk-free rate. Thus the loan takers could offer the proceeds at lower rates than the rates paid on current deposits. Accordingly, funding by banks would shift to the new deposits, and since the new self-insured depositors would have equity at stake, they would have no choice but to duly monitor their banks and impose rate premiums based on each bank's indigenous risk. With these reforms, some very costly imperfections of current deposit insurance would be eliminated: the FDIC would now have in place a program that would dissuade banks from moral hazard and high risk and set the foundation for better disciplined, safer, and more cost-efficient banking

Reforming deposit insurance: The case to replace FDIC protection with self-insurance

The Federal Deposit Insurance Corporation (FDIC) currently insures bank deposit balances up to $100,000. According to some observers, statutory protection creates moral hazard problems for insurers because it allows banks to engage in risky activities. As an example, moral hazard was a key contributor to huge losses suffered when thrift institutions failed during the 1980s. This brief by Panos Konstas outlines a plan to reduce the risk of government losses by replacing insured deposits with uninsured deposits and eliminating some of the costs of deposit insurance. His plan proposes a self-insured (SI) depositor system that places an intermediary between the lender (saver) and borrower (bank) in the credit-flow chain. The FDIC would guarantee saver loans and allow the intermediary to borrow at the risk-free interest rate if the intermediary's bank deposit is statutorily defined outside the realm of FDIC insurance. The risk is therefore transferred to depositors (intermediaries); thus creating incentives for depositors to earn a rate of return at least equal to the cost of borrowing plus a risk premium based on the risk profile of banks

Preservative-free versus preserved latanoprost eye drops for reducing intraocular pressure: a non-inferiority phase III randomized, multi-center, single-blind, parallel-group controlled trial

Background: The aim of this study was to test the non-inferiority of preservative-free (PF) latanoprost 50 μg/mL multi-dose ophthalmic solution versus the marketed benzalkonium chloride (BAK)-preserved latanoprost 50 μg/mL ophthalmic solution in patients with open-angle glaucoma and patients with ocular hypertension. Methods: This was a prospective, national, randomized, multi-center, observer-blind, parallel-group controlled clinical trial. Patients were randomized to receive either PF or BAK-preserved latanoprost once daily for 12 weeks. The primary endpoint was the change in intraocular pressure (IOP) at 8:00 AM in the affected eye between the end of the treatment (week 12) and the baseline (week 0). Secondary measurements were taken at weeks 2 and 6, with IOP being recorded at 8:00 AM, 12:00 PM, and 4:00 PM. Results: A total of 158 patients were included in the per protocol (PP) population (77 in the PF latanoprost treatment arm and 81 patients in the BAK-preserved latanoprost treatment arm). PF latanoprost was non-inferior to BAK-preserved latanoprost in reducing IOP at 8:00 AM in the study eye from the baseline (week 0) to the end of the treatment (week 12). The point estimate of the between-treatment difference was 0.1 mmHg (95% confidence interval: -0.646, 0.847). Mean between-group differences in IOP reduction from the baseline to each of the secondary measurements were also similar between the two treatment arms. The two treatments were well tolerated and had comparable adverse event profiles. Conclusions: PF latanoprost was non-inferior to BAK-preserved latanoprost in reducing IOP in patients with open-angle glaucoma or ocular hypertension. Both treatments were well tolerated

Non-inferiority evaluation of preservative-free latanoprost/timolol eye drops solution versus preserved latanoprost/timolol eye drops in patients with high intraocular pressure and open-angle glaucoma

Background: This study aimed to evaluate the non-inferiority and safety of a newly developed preservative-free (PF) multi-dose latanoprost/timolol ophthalmic solution, compared with the benzalkonium chloride (BAK)-preserved fixed combination, in patients with open-angle glaucoma and ocular hypertension.Methods: A Phase III randomized multi-center observer-blind parallel-group clinical trial was conducted. A total of 210 adult patients (aged over 18 years) were randomly treated with the PF- or the BAK-preserved latanoprost/timolol solution once daily in the affected eye(s) for 12 weeks. Follow-up visits were scheduled at weeks 2, 6, and 12; intraocular pressure (IOP) was recorded at 8:00 AM, 12:00 PM, and 4:00 PM. The primary efficacy endpoint to prove non-inferiority was the IOP change at 8:00 AM (± 1 hour) from the baseline to the end of treatment (week 12) in the studied eye. Safety parameters were also assessed.Results: In total, 196 patients completed the study. The pressure-lowering effect of the PF eye drops was comparable to that of the preserved formulation at all time points. Latanoprost/timolol PF formulation was non-inferior to the BAK-preserved solution as shown by the change in IOP from day 0 to week 12. The point estimate of the inter-treatment difference was 0.624 mmHg (95% CI: -0.094, 1.341). Both treatments were well-tolerated during the study, and they had similar adverse event profiles.Conclusions: PF-latanoprost/timolol combination was found to be non-inferior to the BAK-preserved formulation based on the efficacy at all times, with similar local tolerance