Exam 10: Economic Analysis of Financial Regulation

Acquiring information on a bank's activities in order to determine a bank's risk is difficult for depositors and is another argument for government

The major provisions of the Competitive Equality Banking Act of 1987 include

The contagion effect refers to the fact that

Banks engage in regulatory arbitrage by

To be considered well capitalized,a bank's leverage ratio must exceed

The Federal Deposit Insurance Corporation Improvement Act of 1991

Since depositors,like any lender,only receive fixed payments while the bank keeps any surplus profits,they face the ________ problem that banks may take on too ________ risk.

The federal agencies that examine banks include

The Basel Accord,an international agreement,requires banks to hold capital based on

Regulators attempt to reduce the riskiness of banks' asset portfolios by

Banks will be examined at least once a year and given a CAMELS rating by examiners. The L stands for

The S&L Crisis can be analyzed as a principal-agent problem. The agents in this case,the ________,did not have the same incentive to minimize cost to the economy as the principals,the ________.

Competition between banks

The collapse of the Bank of Credit and Commerce International,BCCI,showed the difficulty of international banking regulation. BCCI operated in more than ________ countries and was supervised by the small country of ________.

That several hundred S&Ls were not even examined once in the period January 1984 through June 1986 can be explained by

A system of deposit insurance

A well-capitalized financial institution has ________ to lose if it fails and thus is ________ likely to pursue risky activities.

A common element in all of the banking crisis episodes in different countries is

The government safety net creates ________ problem because risk-loving entrepreneurs might find banking an attractive industry.

Regular bank examinations and restrictions on asset holdings help to indirectly reduce the ________ problem because,given fewer opportunities to take on risk,risk-prone entrepreneurs will be discouraged from entering the banking industry.