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objective – This paper aims to make clear the results of introducing depositor choice on resolution charges, probability of default and bank funding expenses, permitting for the possibility of collateralized funding. structure/methodology/approach – the necessity of conflict among the creditors in building bankruptcy costs is documented. A design of this kind of conflict is furnished, which can be then Employed in analyzing ... [present whole summary] the effects of depositor desire and also other kinds of asset encumbrance. The model usually takes under consideration the reactions of vendors of secured and unsecured financing. conclusions – Depositor choice and collateralization of borrowing may perhaps minimize the price of settling the conflicts between creditors that occurs in the event of resolution or personal bankruptcy. This net profit, which may be capitalized into the value from the lender as an alternative to affect creditors’ envisioned returns, should really end in lessen Over-all funding fees and therefore a decreased probability of distress Even with increasing encumbrance from the lender’s harmony sheet.