How Can the Regulators Reduce the Effects of Moral Hazard

question 39

Multiple Choice

How can the regulators reduce the effects of moral hazard in the absence of depositor discipline?

• A)By allowing DTIs to undertake high-risk high-return asset investments.
• B)By basing deposit insurance premiums on a DTI's deposit size.
• C)By charging explicit deposit insurance premiums and implicit premiums on DTIs.
• D)By exhibiting excessive capital forbearance.
• E)By implementing prompt corrective action capital zones based on rules rather than discretion.

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Definitions:

Tunnel Collapsed

An incident where a tunnel caves in or falls down, often resulting in blockage or the potential for injury and damage.

Business Ethics Obligations

Entail the moral responsibilities and practices companies should follow to ensure fairness, transparency, and integrity in their operations.

Triple Bottom Line

The idea that investors and others should consider not only corporate profits, but also the corporation’s impact on people and on the planet in assessing the firm. (The bottom line is people, planet, and profits.)

Platitudes

Statements that are used too often to be interesting or thoughtful; they are generally lacking in originality or significance.