The use of high leveraging by banks leads to the banking system's
A) competitiveness.
B) instability.
C) vital role in the economy.
D) monopoly power.

Question

Quizplus · Accepted Answer

High leveraging by banks can lead to instability in the banking system. With high leverage, banks are vulnerable to losses and defaults due to small changes in the value of their assets. If many banks are highly leveraged and experience losses, it can lead to a crisis in the banking system and cause economic instability.

The Use of High Leveraging by Banks Leads to the Banking