Requiring banks to use less leveraging is equivalent to
A) expanding the loan portfolio of banks.
B) reducing the banks' reserve ratio.
C) requiring a higher level of bank net worth.
D) requiring banks to accept more deposits.

Question

Quizplus · Accepted Answer

Requiring banks to use less leverage means that they are required to have a higher level of bank net worth. This means they have to hold a larger percentage of their assets in equity to reduce the amount of borrowing and leverage they rely on. This helps to decrease the risk of insolvency and increases the stability of the banking system. A, B, and D are not equivalent to requiring banks to use less leverage.

Requiring Banks to Use Less Leveraging Is Equivalent to