The objective of bank management is to
A)maximize stockholders' profits by making risky investments and giving loans to borrowers who will pay the highest interest rates.
B)refuse to make risky loans and make loans only to the safest borrowers.
C)invest in the U.S.government securities and make loans only to established businesses.
D)strike the appropriate balance between the attraction of bank profits and the need for bank safety.

Question

Quizplus · Accepted Answer

Bank management should aim for a balance between profit maximization and risk-taking, while ensuring the safety of the bank and its customers' funds. This approach involves evaluating and managing risks, diversifying the loan portfolio, ensuring proper capitalization, and complying with regulatory requirements. By striking this balance, banks can sustain their profitability and remain competitive while minimizing the likelihood of financial distress or failure. Choices A, B, and C all reflect extreme approaches that could lead to either excessive risk-taking or overly conservative lending.

The Objective of Bank Management Is to