In situations where the required reserve shortfall exceeds 4 percent, the bank may be
A)assessed explicit monetary penalties by the Federal Reserve Bank.
B)assessed implicit penalties in the form of more frequent monitoring and examinations.
C)allowed to carry 4 percent of the required reserves to the next maintenance period.
D)declared insolvent.
E)Answers A, B, and C only.

Question

Quizplus · Accepted Answer

In situations where the required reserve shortfall exceeds 4 percent, the bank may be assessed explicit monetary penalties by the Federal Reserve Bank, assessed implicit penalties in the form of more frequent monitoring and examinations, and allowed to carry 4 percent of the required reserves to the next maintenance period. Therefore, the correct answer is A, B, and C only. The bank will not be declared insolvent immediately, as there are steps and processes before a bank can be declared insolvent.

In Situations Where the Required Reserve Shortfall Exceeds 4 Percent