1) The practice of keeping high risk assets on a bank”s books while removing low risk assets with the same capital requirement is know as
A) competition in laxity.
B) depositor supervision.
C) regulatory arbitrage.
D) a dual banking system.
2) Banks engage in regulatory arbitrage by
A) keeping high risk assets on their books while removing low risk assets with the same capital requirement.
B) keeping low risk assets on their books while removing high risk assets with the same capital requirement.
C) hiding risky assets from regulators.
D) buying risky assets from arbitragers.
3) Because banks engage in regulatory arbitrage, the Basel Accord on risk based capital requirements may result in
A) reduced risk taking by banks.
B) reduced supervision of banks by regulators.
C) increased fraudulent behavior by banks.
D) increased risk taking by banks.