Exam 10: Economic Analysis of Financial Regulation

Although the CDIC was created to prevent bank failures, its existence encourages banks to ________.

Bank examiners include ________.

What is the "too-big-to-fail" policy of the CDIC? how is it associated with asymmetric information problems?

The MacKay Task Force may recommend that the ________.

The evidence from banking crises in other countries indicates that ________.

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.

A bank failure is less likely to occur when ________.

The Depository Institutions Deregulation and Monetary Control Act of 1980 ________.

Banks engage in regulatory arbitrage by ________.

The 2011 premium rate (as a percentage of insured deposits)for member institutions in risk category 2 was ________.

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

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

Regulations designed to provide information to the marketplace so that investors can make informed decisions are called ________.

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

Banking regulation suffers from the principal-agent problem. Describe how this problem relates to regulators and politicians.

The Differential Premiums By-law classifies CDIC institutions according to their risk profile. ________ dominate the criteria.

The result of the too-big-to-fail policy is that ________ banks will take on ________ risks, making bank failures more likely.

One of the reasons for the failure of Canadian Commercial and Northland banks was ________.

When the CDIC takes control of the bank, rather than liquidate it, it believes that the takeover ________.

With ________, firms value assets on their balance sheet at what they would sell for in the market.