Why do regulators prefer higher capital requirements?
A)It justifies the existence of regulatory agencies.
B)It protects the deposit insurance fund from serious losses.
C)It enhances bank asset quality.
D)It decreases bank profitability.
E)It increases bank leverage.

Question

Quizplus · Accepted Answer

Regulators prefer higher capital requirements in order to protect the deposit insurance fund from serious losses. Higher capital requirements ensure that banks have enough equity to absorb potential losses and prevent the need for a bailout, which ultimately protects depositors and taxpayers.

Why Do Regulators Prefer Higher Capital Requirements