Uniform capital requirements in the early 1980s tended to motivate banks to increase their off-balance-sheet activities.

Question

Quizplus · Accepted Answer

Uniform capital requirements made it more expensive for banks to hold certain assets on their balance sheets because they had to hold capital against them. As a result, banks were motivated to increase their off-balance-sheet activities, such as derivatives and securitizations, to bypass these capital requirements.

Uniform Capital Requirements in the Early 1980s Tended to Motivate