If a financial institution is systemically important:
A) it is an important part of the Federal Reserve banking system.
B) the business cycle affects it more than it affects the average financial institution.
C) its activities have the potential to cause a banking crisis.
D) it is not allowed to engage in maturity transformation.
Answer Key

Question

Quizplus · Accepted Answer

Systemically important financial institutions (SIFIs) are those whose failure or distress could cause a financial crisis or lead to significant disruptions in the financial system. Their activities have the potential to cause contagion effects and disrupt financial markets, hence they are subject to greater regulatory scrutiny and supervision.

If a Financial Institution Is Systemically Important