What special problem do off-balance-sheet activities present to bank regulators, and what have they done about it?

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Part 1

What special problem do off-balance-sheet activities present to bank regulators?

Select the best answer:

A.

They do not appear on bank balance sheets, so they cannot be dealt with by simple bank capital requirements.

B.

They are not included with other bank assets, so the leverage ratio does not reflect the true risk.

C.

They do not appear on bank balance sheets, but they still expose banks to risk.

D.

All of the above

Part 2

What have regulators done about the special problems of off-balance sheet activities?

Choose one response from the drop-down menu:

Banking regulators have dealt with this problem by imposing an additional risk-based bank

loan

deposit

capital

requirement.