Financial Markets and Institutions, 9e (Mishkin)

Chapter 18 Financial Regulation

18.1 Multiple Choice

1) During the boom years of the 1920s, bank failures were quite
A) uncommon, averaging less than 30 per year.
B) uncommon, averaging less than 100 per year.
C) common, averaging about 600 per year.
D) common, averaging about 2,000 per year.
Answer: C
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

2) When one party to a transaction has incentives to engage in activities detrimental to the other
party, there exists a problem of
A) moral hazard.
B) split incentives.
C) ex ante shirking.
D) precontractual opportunism.
Answer: A
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

3) Moral hazard is an important consequence of insurance arrangements because the existence of

insurance
A) provides increased incentives for risk taking.
B) impedes efficient risk taking.
C) causes the private cost of the insured activity to increase.
D) does both A and B of the above.
E) does both B and C of the above.
Answer: A
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

4) The existence of deposit insurance can increase the likelihood that depositors will need
deposit protection, as banks with deposit insurance
A) are likely to take on greater risks than they otherwise would.
B) are likely to be too conservative, reducing the probability of turning a profit.
C) are likely to regard deposits as an unattractive source of funds due to depositors' demands for
safety.
D) are placed at a competitive disadvantage in acquiring funds.
Answer: A
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

1
Copyright © 2018 Pearson Education, Inc.
5) Although the FDIC was created to prevent bank failures, its existence encourages banks to
A) take too much risk.
B) hold too much capital.
C) open too many branches.
D) buy too much stock.
Answer: A
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

6) Research at the World Bank has found that, on average, the adoption of explicit government
deposit insurance is associated with ________ banking sector stability and a ________ incidence
of banking crises.
A) less; higher
B) higher; lower
C) less; lower
D) higher; higher
Answer: A
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: New Question

7) When bad drivers line up to purchase collision insurance, automobile insurers are subject to
the
A) moral hazard problem.
B) adverse selection problem.
C) assigned risk problem.
D) ill queue problem.
Answer: B
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

8) Just prior to the global financial crisis, mortgage loans known as NINJA loans were issued to
borrowers. What is a NINJA loan?
A) A loan issued by a Japanese bank, thus avoiding U.S. regulation.
B) A loan document originated by a mortgage banker named Bruce Lee.
C) A loan issued to borrowers with no income, employment, nor assets to speak of.
D) A loan issued with a "martial arts" clause.
Answer: C
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

2
Copyright © 2018 Pearson Education, Inc.
9) Deposit insurance
A) attracts risk-prone entrepreneurs to the banking industry.
B) encourages bank managers to take on greater risks than they otherwise would.
C) reduces the incentives of depositors to monitor the riskiness of their banks' asset portfolios.
D) does all of the above.
E) does only A and B of the above.
Answer: D
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

10) The possibility that the failure of one bank can hasten the failure of other banks is called the
A) bank run effect.
B) moral hazard effect.
C) contagion effect.
D) adverse selection effect.
Answer: C
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

11) If the FDIC decides that a bank is too big to fail, it will use the ________ method, effectively
ensuring that ________ depositors will suffer losses.
A) payoff; large
B) payoff; no
C) purchase and assumption; large
D) purchase and assumption; no
Answer: D
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

12) If the FDIC uses the purchase and assumption method to handle a failed bank,
A) all deposits will suffer losses.
B) small deposits will be paid in full but deposits over the insurance limit will not.
C) all deposits will be paid in full.
D) none of the above will occur.
Answer: C
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

13) One problem of the too-big-to-fail policy is that it ________ the incentives for ________ by
big banks.
A) reduces; moral hazard by big banks
B) increases; moral hazard by big banks
C) reduces; adverse selection by big banks
D) increases; adverse selection by big banks
Answer: B
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition
3
Copyright © 2018 Pearson Education, Inc.
14) The result of the too-big-to-fail policy is that ________ banks will take on ________ risks,
making bank failures more likely.
A) small; fewer
B) small; greater
C) large; fewer
D) large; greater
Answer: D
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

15) The too-big-to-fail policy

A) exacerbates moral hazard problems.
B) puts large banks at a competitive disadvantage in attracting large deposits.
C) treats large depositors of small banks inequitably when compared to depositors of large
banks.
D) does only A and C of the above.
Answer: D
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

16) The primary difference between the "payoff" and the "purchase and assumption" methods of
handling failed banks is that the FDIC
A) guarantees all deposits, not just those under the $250,000 limit, when it uses the "payoff"
method.
B) guarantees all deposits, not just those under the $250,000 limit, when it uses the "purchase
and assumption" method.
C) is more likely to use the "payoff" method when the bank is large and it fears that depositor
losses may spur business bankruptcies and other bank failures.
D) does both A and B of the above.
E) does both B and C of the above.
Answer: B
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

4
Copyright © 2018 Pearson Education, Inc.
17) The primary difference between the "payoff" and the "purchase and assumption" methods of
handling failed banks is that the FDIC
A) guarantees all deposits, not just those under the $250,000 limit, when it uses the "payoff"
method.
B) guarantees all deposits, not just those under the $250,000 limit, when it uses the "purchase
and assumption" method.
C) is less likely to use the "payoff" method when the bank is large and it fears that depositor
losses may spur business bankruptcies and other bank failures.
D) does both A and B of the above.
E) does both B and C of the above.
Answer: E
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

18) 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.
Answer: E
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

19) One way for bank regulators to assure depositors that a bank is not taking on too much risk is
to require the bank to
A) diversify its loan portfolio.
B) reduce its equity capital.
C) reduce the size of its loan portfolio.
D) do both A and B of the above.
E) do both B and C of the above.
Answer: A
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

20) Banks do not want to hold too much capital because

A) they do not bear fully the costs of bank failures.
B) higher returns on equity are earned when bank capital is smaller, all else equal.
C) higher capital levels attract the scrutiny of regulators.
D) all of the above.
E) only A and B of the above.
Answer: E
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

5
Copyright © 2018 Pearson Education, Inc.
21) When regulators engage in microprudential regulation, they focus on
A) the safety and soundness of individual financial institutions.
B) the credit standards of individual loans.
C) the safety and soundness of each customer of a financial institution.
D) the safety and soundness of each asset the financial institution holds.
Answer: A
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

22) When regulators engage in macroprudential regulation, they focus on

A) the safety and soundness of the entire financial institution.
B) the credit standards of all loans held by the financial institution.
C) the safety and soundness of the financial system in aggregate.
D) the safety and soundness of each liability of the financial institution.
Answer: C
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

23) The increased integration of financial markets across countries and the need to make the
playing field equal for banks from different countries led to the Basel Accord agreement to
A) standardize bank capital requirements internationally.
B) reduce, across the board, bank capital requirements in all countries.
C) sever the link between risk and capital requirements.
D) do all of the above.
Answer: A
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

24) Under the Basel plan,

A) assets and off-balance sheet activities are assigned to various categories to reflect the degree
of credit risk.
B) a bank's total capital must equal or exceed 8 percent of total risk-weighted assets.
C) both of the above occur.
D) none of the above occur.
Answer: C
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

25) Of the following assets, the one which has the highest capital requirement under the Basel
Accord is
A) municipal bonds.
B) residential mortgages.
C) commercial paper.
D) securities issued by industrialized countries' governments.
Answer: C
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition
6
Copyright © 2018 Pearson Education, Inc.
26) An SIV, or structured investment vehicle, is an off-balance-sheet entity that shields a
sponsoring institution from risk. What happened to some of these SIVs when they ran into
financial problems?
A) The SIV sued the sponsoring institution to pay, in full, all liabilities of the SIV.
B) The SIV still remained off-balance-sheet, but investors did sue sponsoring institutions.
C) Nothing! The SIV status as off-balance-sheet remained, a nice example of a financial
structure that worked during the financial crisis.
D) Troubled SIVs became an asset of the sponsoring institution — the off-balance-sheet status
was meaningless.
Answer: D
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

27) What role did the credit-rating agencies play leading up to the start of the financial crisis in
2007?
A) Inaccurate ratings provided by credit-rating agencies helped promote risk taking throughout
the financial system.
B) The credit-rating agencies were the first to see signs of trouble, and they developed more
stringent standards as the housing bubble evolved.
C) Solid ratings provided by credit-rating agencies helped limit risk taking throughout the
financial system.
D) The credit-rating agencies were largely uninvolved with the financial crisis.
Answer: A
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

28) Which of the following is not true regarding the Basel 2 proposal to reform the original 1988
Basel Accord?
A) It attempts to link capital requirements more closely to actual risk by expanding the number
of risk categories.
B) It focuses on assessing the quality of risk management in banking institutions.
C) It attempts to improve market discipline by requiring increased disclosure of pertinent
information about banks.
D) It has been well received by banks and national regulatory agencies.
Answer: D
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

7
Copyright © 2018 Pearson Education, Inc.
29) Ways in which bank regulations reduce the adverse selection and moral hazard problems in
banking include
A) a chartering process designed to prevent crooks from getting control of a bank.
B) restrictions that prevent banks from acquiring certain risky assets, such as common stocks.
C) high bank capital requirements to increase the cost of bank failure to the owners.
D) all of the above.
E) only A and B of the above.
Answer: D
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

30) The chartering process is especially designed to deal with the ________ problem, and regular
bank examinations help to reduce the ________ problem.
A) adverse selection; adverse selection
B) adverse selection; moral hazard
C) moral hazard; adverse selection
D) moral hazard; moral hazard
Answer: B
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

31) The chartering process is especially designed to deal with the ________ problem, and
restrictions on asset holdings help to reduce the ________ problem.
A) adverse selection; adverse selection
B) adverse selection; moral hazard
C) moral hazard; adverse selection
D) moral hazard; moral hazard
Answer: B
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

32) Regular bank examinations and restrictions on asset holdings indirectly help to reduce the
________ problem because, given fewer opportunities to take on risk, risk-prone entrepreneurs
will be discouraged from entering the banking industry.
A) moral hazard
B) adverse selection
C) ex post shirking
D) post-contractual opportunism
Answer: B
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

8
Copyright © 2018 Pearson Education, Inc.
33) Regular bank examinations and restrictions on asset holdings indirectly help to ________ the
adverse selection problem because, given fewer opportunities to take on risk, risk-prone
entrepreneurs will be ________ from entering the banking industry.
A) increase; encouraged
B) increase; discouraged
C) reduce; encouraged
D) reduce; discouraged
Answer: D
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

34) The legislation that separated commercial banking from the securities industry is known as
the
A) National Bank Act.
B) Federal Reserve Act.
C) Glass-Steagall Act.
D) McFadden Act.
Answer: C
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

35) The Depository Institutions Deregulation and Monetary Control Act of 1980
A) approved NOW accounts nationwide.
B) restricted the use of ATS accounts.
C) imposed interest rate ceilings on bank loans.
D) did all of the above.
Answer: A
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

36) The Depository Institutions Deregulation and Monetary Control Act of 1980
A) approved NOW accounts nationwide.
B) imposed uniform reserve requirements.
C) mandated the phase out of interest-rate ceilings on deposits.
D) did all of the above.
E) did only A and B of the above.
Answer: D
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

9
Copyright © 2018 Pearson Education, Inc.
37) As a way of stemming the decline in the number of savings and loans and mutual savings
banks, the Garn-St. Germain Act of 1982 allowed
A) money market certificates.
B) money market mutual funds.
C) money market deposit accounts.
D) negotiable order of withdrawal accounts.
Answer: C
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

38) An impact of the Garn-St. Germain Act of 1982 has been to

A) put savings and loans at a competitive disadvantage.
B) make the banking system more competitive.
C) give money market mutual funds a competitive advantage.
D) do both A and B of the above.
E) do both A and C of the above.
Answer: B
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: Previous Edition

39) Although banking crisis throughout the world are similar, one big difference between other
countries and the U.S. is that ________ did not play a large role.
A) credit
B) risk-taking
C) deposit insurance
D) financial liberalization
Answer: C
Topic: Chapter 18.3 Banking Crises Throughout the World in Recent Years
Question Status: New Question

40) The cost of rescuing banks in Indonesia tops the list in terms of cost as a percentage of GDP.
Rescuing banks following the crisis in 1997-2001 cost ________ of Indonesia's GDP.
A) 30%
B) 57%
C) 75%
D) 110%
Answer: B
Topic: Chapter 18.3 Banking Crises Throughout the World in Recent Years
Question Status: New Question

10
Copyright © 2018 Pearson Education, Inc.
41) A common element to all the banking crisis in countries discussed is the existence of
A) strict capital requirements.
B) some type of deposit insurance.
C) strong government regulation.
D) a government safety net.
Answer: D
Topic: Chapter 18.3 Banking Crises Throughout the World in Recent Years
Question Status: New Question

42) Which of the following categories is not part of the Dodd-Frank legislation of 2010?
A) capital requirements
B) consumer protection
C) "Volcker Rule"
D) derivatives
Answer: A
Topic: Chapter 18.4 The Dodd-Frank Bill, Wall Street Reform and Consumer Protection Act of
2010
Question Status: Previous Edition

43) In an effort to control the use of derivatives by financial institutions, the Dodd-Frank
legislation of 2010 requires
A) standardized derivatives products.
B) over-the-counter trading (instead of exchange trading) of derivatives products.
C) an increase in counterparty risk.
D) all of the above.
Answer: A
Topic: Chapter 18.4 The Dodd-Frank Bill, Wall Street Reform and Consumer Protection Act of
2010
Question Status: Previous Edition

44) If a financial firm is deemed ________, it poses a risk to the overall financial system because
its failure would cause widespread damage.
A) financially important
B) systematic
C) systemic
D) too-big
Answer: C
Topic: Chapter 18.4 The Dodd-Frank Bill, Wall Street Reform and Consumer Protection Act of
2010
Question Status: New Question

11
Copyright © 2018 Pearson Education, Inc.
45) The Dodd-Frank bill requires many standardized derivative products ________ to reduce the
risk of losses.
A) to be held off-balance-sheet
B) to be banned
C) to be sold monthly
D) to be traded on exchanges and cleared through clearinghouses
Answer: D
Topic: Chapter 18.4 The Dodd-Frank Bill, Wall Street Reform and Consumer Protection Act of
2010
Question Status: New Question

46) Which of the following is least likely to accompany financial consolidation and the
development of large, complex banking organizations?
A) More financial institutions will be considered too big to fail.
B) The government safety net will be extended to include nonbanking activities.
C) Moral hazard problems will become less important.
D) Banks will have greater incentives and opportunities to take on more risk.
Answer: C
Topic: Chapter 18.5 Too-big-to-fail and Future Regulation
Question Status: Previous Edition

47) Which of the following solutions have been proposed to solve the too-big-to-fail problem?
A) Break up large, systemically important financial institutions.
B) Impose higher capital requirements on large, systemically important financial institutions.
C) Do nothing, since Dodd-Frank effectively eliminated the problem.
D) All of the above have been proposed.
Answer: D
Topic: Chapter 18.5 Too-big-to-fail and Future Regulation
Question Status: Previous Edition

48) Some view that Dodd-Frank eliminated the too-big-to-fail problem. How did it achieve this?
A) By making it harder for the Federal Reserve to bail out financial institutions
B) By eliminating the Volcker rule
C) By reducing the regulation of SIFIs
D) All of the above.
Answer: A
Topic: Chapter 18.5 Too-big-to-fail and Future Regulation
Question Status: Previous Edition

12
Copyright © 2018 Pearson Education, Inc.
49) World Bank research on the effects of deposit insurance concludes that
A) adoption of deposit insurance will promote stability and efficiency in the banking systems of
emerging-market economies.
B) adoption of explicit government deposit insurance is associated with a higher incidence of
banking crises.
C) adoption of deposit insurance has the greatest benefits in countries that have weaker
institutional environments.
D) none of the above are true.
Answer: B
Topic: Chapter 18.A1 Banking Crises Throughout the World
Question Status: Previous Edition

50) What accounts for the problems facing China's four largest banks?
A) Large loans to inefficient, state-owned enterprises
B) Closing of unprofitable branches and laying off unproductive employees
C) Selling shares in the bank overseas to raise capital
D) All of the above
Answer: A
Topic: Chapter 18.A1 Banking Crises Throughout the World
Question Status: Previous Edition

18.2 True/False

1) To understand banking regulation in the United States, it is helpful to understand the concepts
of asymmetric information, adverse selection, and moral hazard.
Answer: TRUE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

2) Because asymmetric information problems in the banking industry are a fact of life throughout
the world, bank regulation in other countries is similar to that in the United States.
Answer: TRUE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

3) The failure of one bank can hasten the failure of others in what is referred to as a contagion
effect.
Answer: TRUE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

4) To be classified as a well-capitalized bank, a bank's leverage ratio must exceed 8 percent.

Answer: FALSE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

13
Copyright © 2018 Pearson Education, Inc.
5) Once a bank has been chartered, it is required to file periodic call reports that reveal the bank's
assets and liabilities, income, ownership, and other details.
Answer: TRUE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

6) "Truth in lending" was mandated under the Consumer Protection Act of 1969 and requires all
lenders to reveal the annual percentage rate, or APR, on loans.
Answer: TRUE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

7) Probably the most important feature of FDICIA is its prompt corrective action provisions
which require the FDIC to intervene earlier and more vigorously when a bank gets into trouble.
Answer: TRUE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

8) According to some economists, Congress made a mistake when it passed the FDICIA of not
requiring the FDIC to assess risk-based insurance premiums.
Answer: FALSE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

9) The "too-big-to-fail" policy reduces the adverse selection problem in bank regulation.
Answer: FALSE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

10) A better capitalized bank has more to lose when it fails and is less likely to take less risk.
Answer: TRUE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

11) When the payoff method is used to resolve a failed bank, both large and small depositors are
protected from suffering losses.
Answer: FALSE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

12) In the years just prior to the global financial crisis, mortgage loans were issued to borrowers
with no income or employment.
Answer: TRUE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

14
Copyright © 2018 Pearson Education, Inc.
13) Bank failures in the U.S. have spiked only twice: in the 1930s and around 2010.
Answer: FALSE
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: New Question

14) In the absence of a government safety net, financial institutions have little incentive to take
on too much risk.
Answer: FALSE
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: New Question

15) Limitations of the Basel Accord became apparent because the regulatory measure of bank
risk as stipulated by the risk weights differed substantially from the actual risk the bank faced.
Answer: TRUE
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: New Question

16) Rescuing Indonesia from a banking crisis tops the list in term of costs relative to GDP at
57%.
Answer: TRUE
Topic: Chapter 18.3 Banking Crises Throughout the World in Recent Years
Question Status: New Question

17) The Dodd-Frank legislation of 2010 finally resolved the status of GSEs such as Freddie Mac.
Answer: FALSE
Topic: Chapter 18.4 The Dodd-Frank Bill, Wall Street Reform and Consumer Protection Act of
2010
Question Status: Previous Edition

18) Prior to the global financial crisis, inaccurate ratings provided by credit rating agencies
helped promote risk taking throughout the financial system.
Answer: TRUE
Topic: Chapter 18.5 Too-big-to-fail and Future Regulation
Question Status: Previous Edition

18.3 Essay

1) What is the asymmetric information problem and how does it contribute to our understanding
of the structure of bank regulation in the United States and other countries?
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

2) Why does the safety net created by deposit insurance increase the adverse selection and moral
hazard problems in banking? How do bank regulations attempt to overcome these problems?
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

15
Copyright © 2018 Pearson Education, Inc.
3) How can we change the way the credit-rating system works to avoid the problems
encountered with ratings prior to the Global Financial Crisis?
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

4) Describe the difference between macroprudential and microprudential regulation.

Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

5) Discuss some of the problems of Basel 2 that the global financial crisis revealed.
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

6) Discuss the role of mark-to-market accounting during the global financial crisis. Did it help or
hurt credit markets and bank lending?
Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

7) Discuss the role of NINJA loans in the global financial crisis.

Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

8) Why is international financial regulation becoming more important in recent years?

Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

9) Describe the CAMELS rating system used by bank examiners.

Topic: Chapter 18.1 Asymmetric Information as a Rationale for Financial Regulation
Question Status: Previous Edition

10) Discuss the various types of financial regulation and how they are implemented.
Topic: Chapter 18.2 Types of Financial Regulation
Question Status: New Question

11) What do we learn about the causes of banking crises by comparing crises throughout the
world to those that have occurred in the United States?
Topic: Chapter 18.3 Banking Crises Throughout the World in Recent Years
Question Status: Previous Edition

12) Describe 2 of the 5 different categories of regulation found in the Dodd-Frank legislation of
2010.
Topic: Chapter 18.4 The Dodd-Frank Bill, Wall Street Reform and Consumer Protection Act of
2010
Question Status: Previous Edition

16
Copyright © 2018 Pearson Education, Inc.
13) One way to avoid the too-big-to-fail problem with banks is to break-up large, systemically
important financial institutions. What are the downsides to this solution?
Topic: Chapter 18.5 Too-big-to-fail and Future Regulation
Question Status: Previous Edition

14) How does Dodd-Frank claim to eliminate the too-big-to-fail problem?

Topic: Chapter 18.5 Too-big-to-fail and Future Regulation
Question Status: Previous Edition

15) Discuss some of the recent banking crises throughout the world.
Topic: Chapter 18.A1 Banking Crises Throughout the World
Question Status: Previous Edition

17
Copyright © 2018 Pearson Education, Inc.