The Practice of Keeping High-Risk Assets on a Bank's Books

question 28

Multiple Choice

The practice of keeping high-risk assets on a bank's books while removing low-risk assets with the same capital requirement is known as

• A)competition in laxity.
• B)depositor supervision.
• C)regulatory arbitrage.
• D)a dual banking system.

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Definitions:

Consolidated Common Stock

The aggregation of common stock of a parent company and its subsidiaries, presented as total common stock in consolidated financial statements.

Common Stock

Common stock represents ownership shares in a corporation, giving holders voting rights and a portion of the company's profits through dividends.

Par Value

The nominal or face value of a stock or bond, as stated by the issuing company, that has no direct correlation to the market value.

Corporate Existence

The state of being recognized as a legal entity that is separate from its owners, enabling the corporation to own assets, incur liabilities, and enter into contracts.