A better capitalized bank has more to lose when it fails and is less likely to take less risk.

Question

Quizplus · Accepted Answer

This statement is generally true. A bank with more capital (i.e. better capitalized) has a higher cushion to absorb losses, but also has more to lose if it fails. This can incentivize the bank to take less risk or mitigate risk appropriately. However, it is important to note that other factors (such as the bank's business model, market conditions, and regulatory environment) can also impact its risk-taking behavior.

A Better Capitalized Bank Has More to Lose When It