Which of the following are regulations that are designed to reduce the moral haz

Question

Which of the following are regulations that are designed to reduce the moral hazard created by deposit insurance?

Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit.

U.S. banks' bond holdings from a single issuer cannot be less than 40 percent of their capital. U.S. banks cannot make loans to single borrowers that exceed 25 percent of their capital. U.S. banks cannot make loans to single borrowers that exceed 50 percent of their capital. Regulators have also developed minimum capital requirements. U.S. banks' bond holdings from a single issuer cannot exceed 25 percent of their capital.

Explanation / Answer

Reglatory authority has made certain restriction on bank to reduce the moral hazard created by deposit insurance. according to regulatory authority bank should be maximum capital requirement and U.S. banks cannot make loans to single borrowers that exceed 25 percent of their capital.

Option (B) is correct answer.

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