Bank regulators are required to examine and report on the health of financial in
ID: 1213544 • Letter: B
Question
Bank regulators are required to examine and report on the health of financial institutions. 1. How does the bank reserve ratio requirement affect its lending ability? 2. How do "sweep" accounts help banks avoid their reserve requirements? 3. How do money market mutual funds allow banks to avoid reserve requirements? D. The deregulation of US banking industry preceded the 2008 Financial Crisis by less than a decade. 1. What were the objectives of original Glass-Steagall Act in 1933? 2. What were the consequences of its repeal in 1999? 3. Why are there increasing demands to reinstate Glass-Steagall today? Do you agree? Why or why not? E. In the aftermath of the 2008 Financial Crisis, the Basel 3 Accord sought to reduce systemic risk. 1. What are the most serious problems with Basel 2? 2. What are the most significant regulatory improvements of Basel 3? 3. Which provisions do you believe are most important? Which ones are least important? Explain with examples.Explanation / Answer
1. Reserve ration of the bank is the proportionate amount of the money which bank to deposit to the Federal Reserve. This reserve ratio is used for the monetary policy, influencing the borrowing of customers. The amount of reserve ration also able to the change the interest rate of the lending money.
2. A sweep accounts is used to automatically manage the funds between primary cash and secondary investments. Sweep accounts legally allow the banks to have lent their money without paying reserve ration. Eurodollar sweep has given the legal authorization to transfer bank offshore entities.
3. Mutual funds allow investor to invest their money in on small rate of return and Federal Reserve avoids the reserve requirements to banks on the mutual funds. Mutual funds come under the taxation policy.
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