Explain the principal-agent problem in the banking business, Business Management

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QUESTION

(a) Accepting deposits and making loans are the only products offered by a commercial bank. Discuss this statement.

(b) Explain how does a commercial bank normally derive its profits?

QUESTION

(a) Outline the different situations of the principal-agent problem in the banking business and explain why does this problem occur.

(b) Explain how banks have attempted to resolve this problem.

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