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R&P office at IIMB to host seminar on ‘Household Portfolio and Deposit Insurance: Implications for the Supply of Safe Assets’ on 7 October

Prof. Nishant Vats, Washington University, will deliver the talk

30 September, 2025, Bengaluru: The Office of Research and Publications (R&P) will host a seminar on, ‘Household Portfolio and Deposit Insurance: Implications for the Supply of Safe Assets’, to be led by Prof. Nishant Vats, Finance & Accounting (F&A) area, Olin School of Business, Washington University in St. Louis. The seminar is scheduled for 12:00 pm on 7th October 2025, in Classroom K-21.

Abstract:
This paper examines the impact of deposit insurance (DI) on household portfolio allocation between bank deposits and riskier assets. Theoretically, limited DI creates a kink in the capital allocation line, causing depositor bunching at the DI threshold and increased equity holdings. Using a natural experiment in India and individual holdings on stocks, deposits, and mutual funds, we confirm depositor bunching at the DI threshold. Leveraging a bunching-in-differences design, we show that DI expansion shifts portfolios from equities and mutual funds to deposits, driven by unmet demand for safe assets. Bunchers increase their deposits between 3.6% and 5.1% by liquidating their stock holdings, which were more exposed to safer state-owned enterprises, transiently affecting the asset prices of these stocks. We show that the share of bunchers is a sufficient statistic to measure the depositor-implied risk of bank default. Our estimates of the welfare effect of changes in DI show that depositors gain at least 4% as DI increases, even after accounting for the resulting moral hazard by banks.

Speaker Profile:
Prof. Nishant Vats is an Assistant Professor of Finance at the Olin School of Business, Washington University in St. Louis. Before joining Olin, he completed his Ph.D. in Finance from the University of Chicago Booth School of Business. His primary research interests include finance & development, financial intermediation, and corporate finance. He also has a secondary interest in macroeconomics and political economy.

Webpage Link: https://olin.washu.edu/faculty/nishant-vats

Add to Calendar 2025-10-07 05:30:00 2025-10-30 09:40:30 R&P office at IIMB to host seminar on ‘Household Portfolio and Deposit Insurance: Implications for the Supply of Safe Assets’ on 7 October Prof. Nishant Vats, Washington University, will deliver the talk 30 September, 2025, Bengaluru: The Office of Research and Publications (R&P) will host a seminar on, ‘Household Portfolio and Deposit Insurance: Implications for the Supply of Safe Assets’, to be led by Prof. Nishant Vats, Finance & Accounting (F&A) area, Olin School of Business, Washington University in St. Louis. The seminar is scheduled for 12:00 pm on 7th October 2025, in Classroom K-21. Abstract: This paper examines the impact of deposit insurance (DI) on household portfolio allocation between bank deposits and riskier assets. Theoretically, limited DI creates a kink in the capital allocation line, causing depositor bunching at the DI threshold and increased equity holdings. Using a natural experiment in India and individual holdings on stocks, deposits, and mutual funds, we confirm depositor bunching at the DI threshold. Leveraging a bunching-in-differences design, we show that DI expansion shifts portfolios from equities and mutual funds to deposits, driven by unmet demand for safe assets. Bunchers increase their deposits between 3.6% and 5.1% by liquidating their stock holdings, which were more exposed to safer state-owned enterprises, transiently affecting the asset prices of these stocks. We show that the share of bunchers is a sufficient statistic to measure the depositor-implied risk of bank default. Our estimates of the welfare effect of changes in DI show that depositors gain at least 4% as DI increases, even after accounting for the resulting moral hazard by banks. Speaker Profile: Prof. Nishant Vats is an Assistant Professor of Finance at the Olin School of Business, Washington University in St. Louis. Before joining Olin, he completed his Ph.D. in Finance from the University of Chicago Booth School of Business. His primary research interests include finance & development, financial intermediation, and corporate finance. He also has a secondary interest in macroeconomics and political economy. Webpage Link: https://olin.washu.edu/faculty/nishant-vats IIM Bangalore IIM Bangalore communications@iimb.ac.in Asia/Kolkata public
7 Oct 2025

R&P office at IIMB to host seminar on ‘Household Portfolio and Deposit Insurance: Implications for the Supply of Safe Assets’ on 7 October

Add to Calendar 2025-10-07 05:30:00 2025-10-30 09:40:30 R&P office at IIMB to host seminar on ‘Household Portfolio and Deposit Insurance: Implications for the Supply of Safe Assets’ on 7 October Prof. Nishant Vats, Washington University, will deliver the talk 30 September, 2025, Bengaluru: The Office of Research and Publications (R&P) will host a seminar on, ‘Household Portfolio and Deposit Insurance: Implications for the Supply of Safe Assets’, to be led by Prof. Nishant Vats, Finance & Accounting (F&A) area, Olin School of Business, Washington University in St. Louis. The seminar is scheduled for 12:00 pm on 7th October 2025, in Classroom K-21. Abstract: This paper examines the impact of deposit insurance (DI) on household portfolio allocation between bank deposits and riskier assets. Theoretically, limited DI creates a kink in the capital allocation line, causing depositor bunching at the DI threshold and increased equity holdings. Using a natural experiment in India and individual holdings on stocks, deposits, and mutual funds, we confirm depositor bunching at the DI threshold. Leveraging a bunching-in-differences design, we show that DI expansion shifts portfolios from equities and mutual funds to deposits, driven by unmet demand for safe assets. Bunchers increase their deposits between 3.6% and 5.1% by liquidating their stock holdings, which were more exposed to safer state-owned enterprises, transiently affecting the asset prices of these stocks. We show that the share of bunchers is a sufficient statistic to measure the depositor-implied risk of bank default. Our estimates of the welfare effect of changes in DI show that depositors gain at least 4% as DI increases, even after accounting for the resulting moral hazard by banks. Speaker Profile: Prof. Nishant Vats is an Assistant Professor of Finance at the Olin School of Business, Washington University in St. Louis. Before joining Olin, he completed his Ph.D. in Finance from the University of Chicago Booth School of Business. His primary research interests include finance & development, financial intermediation, and corporate finance. He also has a secondary interest in macroeconomics and political economy. Webpage Link: https://olin.washu.edu/faculty/nishant-vats IIM Bangalore IIM Bangalore communications@iimb.ac.in Asia/Kolkata public

Prof. Nishant Vats, Washington University, will deliver the talk

30 September, 2025, Bengaluru: The Office of Research and Publications (R&P) will host a seminar on, ‘Household Portfolio and Deposit Insurance: Implications for the Supply of Safe Assets’, to be led by Prof. Nishant Vats, Finance & Accounting (F&A) area, Olin School of Business, Washington University in St. Louis. The seminar is scheduled for 12:00 pm on 7th October 2025, in Classroom K-21.

Abstract:
This paper examines the impact of deposit insurance (DI) on household portfolio allocation between bank deposits and riskier assets. Theoretically, limited DI creates a kink in the capital allocation line, causing depositor bunching at the DI threshold and increased equity holdings. Using a natural experiment in India and individual holdings on stocks, deposits, and mutual funds, we confirm depositor bunching at the DI threshold. Leveraging a bunching-in-differences design, we show that DI expansion shifts portfolios from equities and mutual funds to deposits, driven by unmet demand for safe assets. Bunchers increase their deposits between 3.6% and 5.1% by liquidating their stock holdings, which were more exposed to safer state-owned enterprises, transiently affecting the asset prices of these stocks. We show that the share of bunchers is a sufficient statistic to measure the depositor-implied risk of bank default. Our estimates of the welfare effect of changes in DI show that depositors gain at least 4% as DI increases, even after accounting for the resulting moral hazard by banks.

Speaker Profile:
Prof. Nishant Vats is an Assistant Professor of Finance at the Olin School of Business, Washington University in St. Louis. Before joining Olin, he completed his Ph.D. in Finance from the University of Chicago Booth School of Business. His primary research interests include finance & development, financial intermediation, and corporate finance. He also has a secondary interest in macroeconomics and political economy.

Webpage Link: https://olin.washu.edu/faculty/nishant-vats