Reference no: EM132009244

1. Which of the following illustrates a difference between the Federal Reserve and the Federal Deposit Insurance Corporation?

The Fed supervises credit unions; whereas the Federal Deposit Insurance Corporation supervises thrift institutions.

The Fed supervises most of the largest banks; whereas the Federal Deposit Insurance Corporation has mostly very small banks under its supervision.

The Fed supervises national banks that are not in Financial Holding Companies or bank holding companies; whereas the Federal Deposit Insurance Corporation supervises bank holding companies.

The Fed supervises state banks that do are not the members of the Federal Reserve System; whereas the Federal Deposit Insurance Corporation supervises all financial holding companies.

2) Regulations on capital holdings, like the Basel Accord, require banks to hold capital relative to risk-weighted assets. How do risk-weighted captial requirements differ from simple regulations on the leverage ratio?

Risk weighted captial requirements require banks that hold riskier assets to hold less capital since return on assets will be higher.  

Risk weighted captial requirements require banks that hold riskier assets to hold more capital to reduce risk of insolvency.

Risk weighted captial requirements require the same minimum leverage ratio for all banks.  

all of these

3) The least costly transaction method for the FDIC to close an insolvent bank is assistance.

purchase and assumption.

payoff.

foreclosure.

4) A cost of deposit insurance is that its existence

reduces the adverse selection problem.

increases the adverse selection problem.

increases the moral hazard problem.

reduces the moral hazard problem.