How Does Increased Deposit Insurance Shape Depositor Intentions?

Abstract

The banking sector is integral to economic stability and financial inclusion, yet many depositors remain cautious about engaging with banks due to concerns that their hard-earned money might get lost due to uncertainties. Deposit insurance is a key mechanism for addressing these concerns, enhancing depositor confidence and safeguarding funds. In the Philippines, this issue has gained relevance with the recent legislative decision to double the deposit insurance coverage to one million pesos per depositor, effective March 2025. This study examines the relationships among behavioral intention and its antecedents in the context of increased deposit coverage. Using partial least squares structural equation modeling, the study finds that financial security, trust, and risk tolerance positively influence behavioral intention, with risk tolerance emerging as the strongest predictor. Mediation analysis highlights the fractional roles of trust and risk tolerance in linking financial security with behavioral intention. Conversely, policy awareness shows neither a direct nor mediating effect, suggesting that knowledge of the policy alone is insufficient to influence behavioral intention. The findings provide actionable insights for policymakers and financial institutions to strengthen perceived security and trust, leverage risk tolerance, and foster broader depositor engagement through effective deposit insurance initiatives.