Question

Those who oppose the direct entry of banks into the securities business argue that ____

A) Banks have an unfair advantage because they have access to low-cost deposits subsidized by deposit insurance

B) Banks face a potential conflict of interest because they can also buy the securities in the open market

C) The greater risk inherent in underwriting securities may provide more bank failures and a less stable banking system

D) All of the above

Answer 1

Those who will be opposing the direct entry of bank into the securities business will be arguing that that these security business are highly risky in nature and the bank exposure into the security market should be leading into a greater exposure of these banks and these banks can faulter in longer period of time and this will be providing into greater risk and this can lead into more Bank failure and less stable banking system.

other options are not true because it is not argued that they will be facing conflict of interest or they will be having an availability of lower cost.

Correct answer will be option (C)the greater risk inherent in underwriting securities may provide more Bank failures and a less stable banking system.