How does fdic discourage the bank from taking too much risk

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Reference no: EM13327880

Consider the flow of funds for a publicly traded bank that is a key lender to Carson company. This bank received equity funding from shareholders, which it used to establish its business. It channels bank deposit funds, which are insured by the federal deposit insurance corporation (FDIC), ti provide loans to Carson company and other firms. The depositors have no idea how the bank uses their funds. Yet, the FDIC does not prevent the bank from making risky loans, so who is monitoring the bank? Do you think the bank is taking more risk than its shareholders desire? How does the FDIC discourage the bank from taking too much risk? Why might the bank ignore the FDIC's effort to discourage excessive risk taking?

Reference no: EM13327880

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