Which action of the holding company to help its securities affiliate can damage the financial health of its banking subsidiary?
A)Downstreaming funds from the subsidiary and then upstreaming it to the securities affiliate.
B)Upstreaming funds from the securities affiliate and then downstreaming it to the bank subsidiary.
C)Indulging in product diversification.
D)Upstreaming funds from the bank subsidiary and then downstreaming it to the securities affiliate.
E)Diversifying the earnings stream of a banking company geographically.

Question

Quizplus · Accepted Answer

Upstreaming funds from the bank subsidiary and then downstreaming it to the securities affiliate can damage the financial health of the bank subsidiary as it reduces the capital base of the subsidiary, making it more vulnerable to financial distress. This can also lead to regulatory issues as regulators closely monitor the capital adequacy of banks.

Which Action of the Holding Company to Help Its Securities