19-35 Risk-based capital supports risk-based deposit insurance premiums by increasing the cost risk taking for DI stockholders.

Question

Quizplus · Accepted Answer

Risk-based capital requirements are designed to make sure that DI institutions hold adequate capital to support their risks. This helps support risk-based deposit insurance premiums by ensuring that institutions that take on more risk are required to hold higher levels of capital, which makes their risk taking more expensive for stockholders. This encourages institutions to manage their risks more effectively, since taking on excessive risk will be more costly for both the institution and its shareholders.

19-35 Risk-Based Capital Supports Risk-Based Deposit Insurance Premiums by Increasing