Arguments against unit banking include the contentions that unit banking the costs of banking services and the risk of bank failures.
A)increases; decreases
B)increases; increases
C)decreases; increases
D)decreases; decreases

Question

Quizplus · Accepted Answer

Unit banking, by definition, refers to a system of banking in which a single bank serves a local community, rather than operating through branches. The disadvantages of this system include increased costs of banking services and an increased risk of bank failures.

The increased costs of banking services are due to the fact that unit banks do not have the same economies of scale as larger banks operating through branches. This means that they may have to charge higher fees and interest rates to cover their costs and make a profit. On the other hand, larger banks can spread their costs over a larger customer base, which allows them to offer lower fees and interest rates.

The increased risk of bank failures is due to the fact that unit banks are more vulnerable to economic downturns and local economic shocks. If a local business or industry experiences a downturn, for example, a unit bank that has lent heavily to that industry may face a high number of loan defaults and become insolvent. In contrast, larger banks with more diversified portfolios may be better able to weather such shocks.

Therefore, the correct answer is B: increases; increases.

Arguments Against Unit Banking Include the Contentions That Unit Banking