1. Bank regulation in the United States Which of the following is an accurate de
ID: 2779990 • Letter: 1
Question
1. Bank regulation in the United States
Which of the following is an accurate description of bank charter?
a. Government permission is needed to establish and operate a depository institution.
b. There exists a system in which bank charters are granted by both the government and private licensing organizations.
c. Society cannot allow just anyone to open a bank because banks have a lot of proprietary information.
d. Government protection from losses may occur if a bank becomes insolvent or fails.
Which of the following most accurately explains the need for bank charters?
a. Society cannot allow just anyone to open a bank because banks have a lot of proprietary information.
b. Government permission is needed to establish and operate a depository institution.
c. Banks do not disclose to whom they have made loans and for how much.
d. The government grants charters to banks.
Explanation / Answer
1.
Financial intermediary, who requires government permission to open, is a bank charter. Main activity of such bank is accepting deposits from public, and providing loans to public.
Answer: a
Alternatives: “b” is not correct, since private organizations have no right of granting.
“c” is not correct, there must not be any involvement of society.
“d” is not correct, there is no such protection like that.
2.
Answer: a
There might not be any acceptance from society, since they require reliance. A bank charter fulfills such reliance, because it is backed by the government.
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