increase, engage, capital, protect, failures, fail, interests, efficiently, expensive, align, protect, insurance, defraud, losses, closes Bank managers and owners must not be given incentives to【1】in behavior. detrimental to the whole banking system. They must either run their banks【2】or face failure. Deposit insurance is meant to【3】the banking system, not poorly run banks. The fact is that bank【4】are often self-inflicted by owners and managers who mismanage. Such losses can be reduced if the supervisor【5】the bank before it fails totally, since delaying a bank closing or sale tends to increase【6】and to spread them to the banking system as a whole. Even without deposit insurance, bank managers may pursue their own【7】at the expense of the bank. But the problem gets worse with【8】. Managers may indulge in such excesses as high salaries,【9】buildings, and lavish furnishings. To combat this problem, managers could receive an 'incentive-compatible contract' to【10】their interests with those of the owners. When the hank is sound, managers can best【11】their professional reputations by keeping it so. However, if a bank begins to【12】and no proper incentive exists to protect its【13】, managers may join owners in being prepared to gamble for recovery by making high-risk loans or to loot or【14】the bank. At that point deposit insurance could【15】their opportunities to do so. (1)