Exam 10: Economic Analysis of Financial Regulation

The cost of rescuing banks ranges from ________ to ________ percent of GDP.

Agreements such as the ________ are attempts to standardize international banking regulations.

The practice of keeping high-risk assets on a bank's books while removing low-risk assets with the same capital requirement is known as ________.

How did the increase in the interest rates in the early 1980s contribute to the insolvency of Canadian Commercial and Northland?

The Basel Committee ruled that regulators in other countries could ________ of a foreign bank if they feel that it lacks effective oversight.

The policy of ________ exacerbated ________ problems as savings and loans took on increasingly huge levels of risk on the slim chance of returning to solvency.

Moral hazard is an important concern of insurance arrangements because the existence of insurance ________.

A system of deposit insurance ________.

One of the problems experienced by the savings and loan industry during the 1980s was ________.

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

Deposit insurance has not worked well in countries with ________.

FDICIA ________ incentives for banks to hold capital and ________ incentives to take on excessive risk.

Competition between banks ________.

When one party to a transaction has incentives to engage in activities detrimental to the other party, there exists a problem of ________.

In terms of international banking crises, deposit insurance ________.

During times of financial crisis, mark-to-market accounting ________.

Deposit co-insurance requires that ________.

The Japanese banking system went through a cycle of ________ in the 1990s similar to the one that occurred in the U.S. in the 1980s.

Deposit insurance covers deposits up to $100,000, but as part of a doctrine called "too-big-to-fail" the CDIC sometimes ends up covering all deposits to avoid disrupting the financial system. When the CDIC does this, it uses the ________.

Because of asymmetric information, the failure of one bank can lead to runs on other banks. This is the ________.