Discuss the regulations that are designed to reduce the moral hazard created by deposit insurance.
Answer to relevant QuestionsExplain how macro-prudential regulations work to limit systemic risk in the financial system.If banks’ fragility arises from the fact that they provide liquidity to depositors, as a bank manager, how might you reduce the fragility of your institution?Explain why, in seeking to avoid financial crises, the government’s role as regulator of the financial system does not imply it should protect individual institutions from failure. Explain the costs of each of the following conditions, and explain who bears them. (LO1)a. Interest-rate instabilityb. Exchange-rate instabilityc. Inflationd. Unstable growthProvide arguments for and against the proposition that a central bank should be allowed to set its own objectives.
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