Question

When regulators engage in macroprudential regulation, they focus on A. the credit standards of all loans held by the financial institution B. the safety and soundness of each liability of the financial institution C. the safety and soundness of the financial system in aggregate D. the safety and soundness of the entire financial institution

Answer 1

C) the safety and soundness of the financial system in aggregate.

Step-by-step explanation:

Macroprudential regulation focuses on reducing systemic risk.

Systemic risk is the financial risk associated with an event from a specific company damaging the whole financial system. Systemic risk was responsible for the collapse leading to the Great Recession (2008-2010).

The "too big to fail" policy is an example of macroprudential regulation.