Deposit insurance programs offering deposit holders insurance protection. This protection cover against losses accruing to bank deposits if a bank fails financially and has no money to pay its depositors and has to go in for liquidation. However, applying this scheme could be associated with its costs and risks.

Please search and discuss the above statement by taking the following positions.

A. Deposit insurance could exacerbate moral hazard risk where management and shareholders will seek higher returns by assuming more risk.