Banks do not want to hold too much capital because
A) they do not bear fully the costs of bank failures.
B) higher returns on equity are earned when bank capital is smaller, all else equal.
C) higher capital levels attract the scrutiny of regulators.
D) all of the above.
E) only A and B of the above.
Correct Answer:
Verified
Q2: Deposit insurance
A) attracts risk-prone entrepreneurs to the
Q5: Although the FDIC was created to prevent
Q5: Regulators attempt to reduce the riskiness of
Q8: The primary difference between the "payoff" and
Q9: The primary difference between the "payoff" and
Q10: The too-big-to-fail policy
A) exacerbates moral hazard problems.
B)
Q11: The possibility that the failure of one
Q12: When one party to a transaction has
Q12: Moral hazard is an important consequence of
Q13: When bad drivers line up to purchase
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