Which action of the holding company to help its securities affiliate can damage the financial health of its banking subsidiary?
A)Downstreaming funds from the subsidiary and then upstreaming it to the securities affiliate.
B)Upstreaming funds from the securities affiliate and then downstreaming it to the bank subsidiary.
C)Indulging in product diversification.
D)Upstreaming funds from the bank subsidiary and then downstreaming it to the securities affiliate.

Question

Quizplus · Accepted Answer

Upstreaming funds from the bank subsidiary and then downstreaming it to the securities affiliate can damage the financial health of the banking subsidiary as it may result in a reduction of capital, liquidity, and credit capacity at the bank. This can lead to increased risks and potentially affect the bank's ability to meet its obligations or regulatory requirements. The other options (A, B, and C) do not involve direct transfers between the bank and the securities affiliate and therefore are less likely to impact the financial health of the banking subsidiary.

Which Action of the Holding Company to Help Its Securities