In order to reduce risk and increase the safety of financial institutions, commercial banks and other depository institutions are prohibited from ________.
A) owning corporate bonds
B) making real estate loans
C) making personal loans
D) owning common stock

Question

Quizplus · Accepted Answer

Commercial banks and other depository institutions are prohibited from owning common stock to reduce risk and increase the safety of financial institutions. This is because the value of common stock is subject to fluctuations in the stock market, which can lead to losses for the institution. By prohibiting ownership of common stock, the institution can focus on safer investments that are less likely to result in significant losses.

In Order to Reduce Risk and Increase the Safety of Financial