Exam questions Essay Example | Topics and Well Written Essays - 2500 words

Exam hesitations - Essay ExampleFurthermore, the chapter reviews the success of fixed outstanding requirements in terms of maintaining the relations between desired capital and risk taking. It also analyzes ways through which banks reduce potential by taking to riskier assets.Capital requirements are also referred to as capital adequacy or restrictive capital. This is the amount of capital that commercial banks hold due to the requirements of the financial regulator. These requirements are necessary for the financial intentness to ensure that commercial banks do not accumulate excess leverage which leads to insolvency. Commercial banks have some(a) behavioral preference when allocating loans to individuals. However, the capital constraints can make the banks to review the behavioral preference. This means that the financial regulator could utilize the strong constraints in capital adequacy to review the fluctuations of the Micro frugality and direct the economy to the require d direction through the financial intermediaries like banks (Altunbas)1.Based on the approval of the Basel II model, this sermon defines the research question in the following way Are rigid pressures exerted by minimum capital requirements efficient in minimizing the risk-taking behavior of banks? The framework of the Basel II structure in the subprime crisis forms the basis within which professionals question the proposals. This area covers the inadequacy of the level of capital requirements.The focus on examining the efficiency of regulatory capital requirements during the carrying out of the proposals in Basel I model report executed from 2002 is part of the entire discourse. However, the discourse does not educate at testing the Basel I framework. Instead, it assess the efficiency of the regulatory pressure in relation to the stratum of capital cushion in cutting down on the risk-taking behavior of financial institutions in the