a. It is argued that the banking model can help depositors (investors) avoid price and liquidity risk. Explain the statement briefly in light of your understanding of the concept of diversification in banking. (Hint: you can refer the any industry data we shared in class by choosing a financial report of any bank of your choice shared in class to show some support of your argument). 

b. Please search and discuss briefly how FIs institutions can decrease agency cost on behalf of their depositors (investors).

c. Under the banking regulations framework, deposit insurance is serving as “safety valve”. However, there is ongoing debate on whether that deposit insurance can create Moral hazard. Discuss.

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a Diversification in Banking and Mitigating Risks Diversification in banking involves spreading investments across various assets to reduce overall ri... View the full answer