Question

Which of the following is not a difficulty in the regulation and supervision of banks?

A. Unintended conséquences may happen if details in the regulations are not precise

B. Financial institutions are not required to follow the rules

C. Financial institutions may have strong incentive to avoid existing regulations

D. There can be political pressure to ease the rules

Answer 1

Solution:-Option B is correct

B. Financial institutions are not required to follow the rules

Explaination:-Financial institutions are not required to follow the rules is not a difficulty in the regulation and supervision of banks why because here considered past  the 1970s, and early 1980s, traditional bank profitability declined because of financial innovation that increased competition from new financial institutions. Financial innovation in the 1970s and early 1980s that produced new financial instruments and markets, thereby widening the scope for risk taking.