How Is the Cost of a Systemic Risk Exemption to the Least-Cost

question 103

Multiple Choice

How is the cost of a systemic risk exemption to the least-cost resolution of bank failures shared among banks?

• A)It is shared equally among all other insured banks.
• B)Additional deposit insurance premiums are imposed on FIs based on their size as measured by their total deposits and borrowed funds excluding subordinated debt.
• C)Additional deposit insurance premiums are imposed on FI based on their size as measured by their total deposits and borrowed funds including subordinated debt.
• D)It is shared equally among all other insured banks based on the profits earned by the FI during the year.
• E)The cost is borne by the bank whose run was responsible for the contagion.

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Definitions:

Obedience to Authority

The tendency of individuals to comply with orders from an authority figure, even if they may disagree with the actions.

Prosocial Consequences

Refers to outcomes of actions that are beneficial to others or society as a whole.

Milgram's Research

A series of social psychology experiments conducted by Stanley Milgram, demonstrating individuals' obedience to authority figures, even when asked to perform actions conflicting with personal conscience.

Dangerous Obedience

Compliance with commands or orders that can result in harm to oneself or others, often discussed in the context of authority experiments.