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13-18 20 22 24
Chapter 13
- Because of the vital nature of the services they provide, commercial banks (CBs) are regulated at the federal level to protect against a disruption in the provision of these services and the cost this would impose on the economy and society.
- 6 types of regulation: (1) safety and soundness (2) monetary policy (3) credit allocation (4) consumer protection (5) investor protection (6) entry and chartering
o safety and soundness
 prevent CBs from investing in an asset portfolio that produces cash flows that are insufficient to make the promised payments to the CB’s liability holders
• banks are prohibited from making loans exceeding 10% of their own equity capital funds
 minimum ratio of capital to risk assets.
• The higher the proportion of cap contributed by owners, the greater the protection against insolvency risk liability claimholders such as depositors.
 Provision of guarantee funds:
• deposit insurance mitigates a......

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Approximate Pages: 34 (250 words per double-spaced page)

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