For banks that have insufficient capital, which of the following is not a typical operating strategy to achieve capital adequacy?
A) Limit asset growth
B) Shrink the bank
C) Increase the dollar amount of commercial loans outstanding
D) Shift more bank assets into lower risk categories.
E) Reprice assets to reflect greater equity support

Question

Quizplus · Accepted Answer

Increasing the dollar amount of commercial loans outstanding would increase the bank's risk-weighted assets, which would decrease its capital adequacy ratio. Therefore, it is not a typical operating strategy to achieve capital adequacy. The other options all involve reducing risk-weighted assets, increasing capital, or improving the bank's risk profile.

For Banks That Have Insufficient Capital, Which of the Following