The government regulates the banking industry by

Question

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The government regulates the banking industry by conducting frequent audits and examinations to ensure that banks are operating within legal boundaries and maintaining the required financial standing. Additionally, the government limits the kinds of assets that a bank may own to prevent excessive risk-taking and potential financial instability. Finally, the government also limits the quantity of some kinds of assets that a bank may own, such as restricting the amount of loans to any one borrower or limiting the amount of securities that a bank may hold.

The Government Regulates the Banking Industry by