Regulators Attempt to Reduce the Riskiness of Banks' Asset Portfolios

question 28

Multiple Choice

Regulators attempt to reduce the riskiness of banks' asset portfolios by

• A) limiting the amount of loans in particular categories or to individual borrowers.
• B) prohibiting banks from holding risky assets such as common stocks.
• C) establishing a minimum interest rate floor that banks can earn on certain assets.
• D) doing all of the above.
• E) doing only A and B of the above.

---

Definitions:

Conformity Pressures

The pressure applied by a group that motivates individuals to modify their attitudes, values, or actions to conform with the norms of the group.

Polarization Theory

A theory suggesting that groups tend to make decisions that are more extreme than the initial inclination of its members.

Risky Shift Theory

suggests that people in groups tend to make riskier decisions compared to when making decisions alone due to diffused responsibility.

Prediscussion Judgments

Initial opinions and decisions held by individuals before engaging in a group discussion, which can influence the group's final decision-making process.