Which of the following is a service of depository institutions?
A) monitoring the Federal Reserve
B) pooling risk
C) decreasing the liquidity drain of funds in the banking system
D) loaning funds to other depository institutions at the discount rate

Question

Quizplus · Accepted Answer

Depository institutions, such as banks and credit unions, provide the service of pooling risk by accepting deposits from multiple customers and using those funds to make loans or invest in assets. This allows for the spread of risk across many borrowers and investments, reducing the likelihood of a loss that would harm any one individual or entity. The other choices are not services provided by depository institutions, with monitoring the Federal Reserve being a responsibility of the central bank itself, decreasing liquidity drain being a possible action taken by the Federal Reserve or other regulatory bodies, and loaning funds to other depository institutions at the discount rate being a possible action taken by the Federal Reserve to influence the money supply.

Which of the Following Is a Service of Depository Institutions