Higher capital requirements will reduce the problems incurred when troubled ________ which had been off-balance sheet activities come back on the balance sheet.

Question

Quizplus · Accepted Answer

Structured investment vehicles (SIVs) are off-balance sheet activities that caused significant problems during the 2008 financial crisis. Higher capital requirements would reduce the risks associated with these activities and minimize the problems when they come back on the balance sheet. The other options listed (negotiable CDs, Eurodollars, and Federal funds) are not off-balance sheet activities and would not benefit from higher capital requirements in the same way as SIVs.

Higher Capital Requirements Will Reduce the Problems Incurred When Troubled