The view that depositors hire banks to analyze the financial condition of prospective borrowers and continually evaluate the condition of outstanding loans is referred to as:
A)delegated monitoring.
B)the concept of financial intermediation.
C)the liquidity function in banking.
D)market imperfection theory.
E)the efficiency contribution of banking.

Question

Quizplus · Accepted Answer

This view is known as delegated monitoring, where depositors rely on banks to perform credit analysis and ongoing evaluation of loans to ensure their safety and soundness.

The View That Depositors Hire Banks to Analyze the Financial