What is meant by prudential regulation

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Question - The balance sheet for Goliath Bank is given below.

$ billion

Assets

Loans 1,000

Gov. Bonds 250

Reserves 100

Liabilities

Deposits 700

Borrowing 600

Equity 50

Required -

(i) Explain the process by which the actions of Goliath Bank can affect the money supply for the economy.

(ii) Discuss the nature of any risks faced by Goliath Bank?

(iii) Explain the role of equity in influencing the riskiness of Goliath Bank.

(iv) Explain the role of deposit insurance in influencing the riskiness of Goliath Bank.

(v) What is meant by prudential regulation? Provide one example of a prudential regulation and explain its purpose.

Reference no: EM132614462

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