Since 1980
A)banks have decreased risk taking to offset the decline in profits.
B)banks have offset the decline in profits from traditional activities with increased income from off-balance-sheet activities.
C)banks have offset the decline in profits from off-balance-sheet activities with increased income from traditional activities.
D)bank profits have grown rapidly due to deregulation.

Question

Quizplus · Accepted Answer

Since 1980, banks have offset the decline in profits from traditional activities with increased income from off-balance-sheet activities, such as derivatives trading and securitization. This allowed them to take on more risks and increase their profits. However, it also led to the 2008 financial crisis when these off-balance-sheet activities turned out to be much riskier than expected.