WASHINGTON - The rising dependence of community banks on Federal Home Loan Bank System advances is putting the deposit insurance funds at risk, according to an article published by the Federal Reserve Bank of St. Louis.

The article, which was carried in the October issue of the bank's Regional Economist magazine, argued that because there are no risk premiums on the advances and because the Home Loan banks can collect collateral ahead of depositors in the event of a bank failure, the insurance funds could be liable to significant losses.

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