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.

Regulators can prohibit banks from making certain types of risky loans and from purchasing particular securities.

U.S. banks' bond holdings from a single issuer cannot be less than 40 percent of their capital.

Regulators can restrict competition so that banks are not under as much pressure to engage in risky investments.

Regulators have also developed minimum capital requirements.

U.S. banks cannot make loans to single borrowers that exceed 50 percent of their capital.

Explanation / Answer

Regulators can prohibit banks from making certain types of risky loans and from purchasing particular securities.

Regulators can restrict competition so that banks are not under as much pressure to engage in risky investments.

Regulators have also developed minimum capital requirements.

the above all three options are correct.

other two options are incorrect because bond holdings from a single issuer cannot exceed 25percent of their capital and U.S. banks cannot make loans to single borrowers that exceed 25 percent of their capital.

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