Will it have less money available to lend

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Reference no: EM131305065

An article in the Wall Street Journal notes that in response to the failure of some small community banks: [The] Federal Deposit Insurance Corp., Federal Reserve and other regulatory agencies are increasing their scrutiny of local lenders. . . .

As part of the effort, the watchdogs are asking the banks to boost their capital and loan-loss reserves even further. . . .

a. How would increasing loan loss reserves reduce the risk of bankruptcy for a smaller bank?

b. If a bank increases its loan loss reserves, will it have less money available to lend?

Reference no: EM131305065

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