Deposit insurance and credit union earnings opacity

This study examines the impact of deposit insurance coverage on credit union earnings opacity. For identification, we employ the provisions outlined in Section 136 of the Emergency Economic Stabilization Act, which raised the upper limit of deposit insurance coverage from $100,000 to $250,000. Using variation in insured deposits brought about by the differential impact of the change to deposit insurance arrangements and a difference-in-differences approach, we find that credit unions experiencing a substantial rise in insured deposits tend to exercise more discretion over loan loss provisions, leading to an increase in earnings opacity. This is most evident for small and medium sized credit unions.