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Moral hazard Arises when the insured takes on more risk because he or she is insured. Causes bankers to overstate the provision for loan loss

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Moral hazard Arises when the insured takes on more risk because he or she is insured. Causes bankers to overstate the provision for loan loss account. Is reduced by providing deposit insurance. Requires the FDIC to charge all banks a constant deposit insurance premium. Refers to the increased risk of lending to sovereign states

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