Capital controls for banks

Question

Quizplus · Accepted Answer

Capital controls for banks can reduce the chance of bank failures by limiting the amount of risk they can take on and preventing large outflows of capital. However, they have not been demonstrated to be effective in preventing financial crises and may even increase the problem of moral hazard by giving banks a false sense of security. Capital controls can also limit the profitability of banks by restricting their ability to expand into international markets.

Capital Controls for Banks