Question

1.a) Major risks banks maybe exposed to?

b) Objectives of bank regulations?

c) Instruments and requirements of bank regulation?

Answer 1

Answers-

Q 1a)

The major risks banks may be exposed to are Credit risk, Market risk, Operational risk, Liquidity risk, Business risk, Systemic risk, Risk due to loss of reputation.  

Q 1b)

The Objectives of bank regulations are

1) Maintaining the Confidence of depositors
2) Protect the Depositors from frauds
3) Preventing banks from risky behaviors
4) Preventing criminal activity
5) Directing banks in disbursal of Credit in the forms of loans
6) Monitoring and maintaining Capital requirement ratios of banks
7) Directing banks in adhering to liquidity ratios

Q 1c)

The instruments and requirements of bank regulation

Capital requirement, Reserve requirement, Financial reporting requirements, Requirements to meet Corporate governance, Disclosure requirements, Meeting credit rating requirements, Large exposures restrictions and Activity and affiliations restrictions.