Of the Following Methods That Banks Might Use to Reduce

question 16

Multiple Choice

Of the following methods that banks might use to reduce moral hazard problems,the one not legally permitted in the United States is the requirement that

• A) firms keep compensating balances at the banks from which they obtain their loans.
• B) firms place on their board of directors an officer from the bank.
• C) loan contracts include restrictive covenants.
• D) individuals provide detailed credit histories to bank loan officers.

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Definitions:

Ethical Climate

The collective understanding within an organization of what is considered morally right or wrong, influencing ethical decision-making.

Performance Targets

Specific goals set by a company or an individual, often quantifiable, aimed at measuring success or achievement in certain areas.

Ethical Responsibility

This concept pertains to the duty to act in a morally sound way, considering the impact of one's actions on others and society.

Personal Ethical Standards

The moral principles that an individual upholds in their personal and professional life.