Moral Hazard in the Banking System Can Occur Because

question 105

Multiple Choice

Moral hazard in the banking system can occur because:

• A) of high capital requirements.
• B) financial regulations ensure banks are prudent.
• C) banks rarely make risky bets.
• D) of low return on assets.
• E) of high leverage ratios.

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Definitions:

Drawer

A person who writes or signs a cheque or draft, instructing a bank to pay a specified amount of money from the person's account.

Presentment

The formal presentation of a document, such as a bill of exchange, for acceptance or payment.

Demand

The consumers' willingness and ability to purchase goods or services at a given price.

Instrument

A formal document, such as a contract, will, or security, that legally records a right, obligation, or transaction.