Why do banks generally prefer lower capital requirements?
A)To minimize the impact shareholders have on management decisions
B)To increase the influence of bank regulators
C)To increase a bank's return on equity
D)To increase depositor protection
E)To maximize operating leverage

Question

Quizplus · Accepted Answer

Banks prefer lower capital requirements because it allows them to leverage their equity investment and increase their return on equity (ROE). With lower capital requirements, the bank's shareholders can provide less equity funding while still generating a high return on their investment. This is beneficial for the bank because it allows them to maximize profits and increase shareholder value.

Why Do Banks Generally Prefer Lower Capital Requirements