With no government regulation, how much bank capitals would banks hold? A. Too much capital, reducing the profitability of banks. B. Too much capital, making it more difficult to obtain loans. C. Too little capital, reducing the profitability of banks. D. Too little capital, making it more likely to fail.
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With no government regulation, how much bank capitals would banks hold?
A. Too much capital, reducing the profitability of banks.
B. Too much capital, making it more difficult to obtain loans.
C. Too little capital, reducing the profitability of banks.
D. Too little capital, making it more likely to fail.
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- 4: Which of the following statements about bank capital are TRUE? Banks hold equity capital to make sure they have enough cash to withstand deposit outflows. Banks with larger leverage ratios have less capital per dollar of assets. A bank holds equity capital to prevent insolvency. The level of bank capital is determined by the owners of the bank without any regulation. The only goal for capital adequacy management is to earn a high return with low risk. The level of bank capital will decrease when a bank has to write-down the value of an asset.Based on the functions of the banking system, give reasons why governments bail out banks during an economic crisis?How does capital protect a bank from failure? Why are banks currently holding capital well above the minimum regulatory requirement? What are the ways in which a bank can increase its capital ratio?
- Minimum capital requirement is a popular tool for bank regulation around the world. Some commented argue for differential capital requirements with the size and the systemic importance of financial institutions as the key discriminating factor. What are the basic arguments for increasing capital requirements at large commercial banks? In what ways will depositors, stockholders, and society in general benefit? How might each group be disadvantaged? As commercial banks enter new lines of business such as brokerage, how much additional capital should be required? Should these new lines of business be insured under a depository insurance scheme? Why or why not? Give examples from today's financial marketplace.What are the advantages and disadvantages of direct lending for the bank? How are banks reducing the effect of the disadvantages?When any central bank wanted to increase the money supply and loosen credit conditions, what would it do in the private market for government bonds? Explain how this is supposed to affect the economy.
- Match the correct type of bank risk with the appropriate associated statement. 1.The possibility that a borrower could make late, reduced, or no payments on their loans. 2.Bank management may make poor strategic decisions that result in lower profits for the bank. 3.Hackers could break into bank customer accounts. 4.Inability to access capital markets and higher borrowing costs could hurt the bank's ability for funding opportunities. 5.Changes in the yield curve could increase short-term rates and/or decrease long-term rates, resulting in a lower net interest margin for the bank. 6.General economic conditions can affect banks in the U.S. Liquidity Risk 7.Differences in the timing and drivers of rate changes reflecting the maturity and/or repricing of assets and liabilities could put the bank's earnings at risk. Credit Risk Business Operations Risk Market risk Interstate Rate Risk Liquidity RiskWhich of the following is a reason for financial regulation? a. To ensure market dominance by strong financial institutions. b. The failure of any financial institution may have a serious negative impact on individuals and economies. c. Banks cannot be trusted. d. To ensure government control of the economy.Bank regulation cannot eliminate risk and does not prevent bank failure. It cannot guarantee that bank management will make good decisions especially in high-risk lending and investment. However, bank regulation can enhance safety and stability of the banking industry. Therefore bank regulation is justified. Do you agree or disagree? Please explain your answer.
- If a bank finds that its ROE is too low because it has toomuch bank capital, what can it do to raise its ROE?Why are the banks reluctant to lend, and what should be done to increase bank lending?all of the following statements about a bank's capital are correct except: bank capital is the cushion a bank has against a sudden drop in the value of its assets a bank is more profitable the more capital it holds bank capital decreases as interest rate increase bank capital is what would be left after a bank's owner sold all the assets and paind off all the liabilities