1-75 Net regulatory burden for FIs is higher because regulators may require the FI to

Question

Quizplus · Accepted Answer

Holding more capital is a key regulatory requirement that creates a higher net regulatory burden for FIs. This is because FIs hold more capital than what would be held without regulation, which reduces the likelihood of a failure and protects customers' interests. Holding more capital, in turn, increases FIs' costs and reduces their profitability.

Option B is not correct because regulations typically require FIs to produce more information, not less. Option C and D are incorrect because there is no evidence that regulations require FIs to hold more debt or fewer reserves than they would without regulation. Option E is also incorrect because not all the options are true.

1-75 Net Regulatory Burden for FIs Is Higher Because Regulators