Question

One way for bank regulators to assure depositors that banks are not taking on too much risk is to require banks to ____

A) Reduce the size of their loan portfolio
B) Go through a chartering process
C) Restrict their asset holdings
D) All of the above

Answer 1

Bank regulators can assure depositors by imposing restrictions on asset holdings, requiring banks to diversify their loans and maintain bonds and reserves, aligning with regulatory requirements such as reserve and capital requirements.

Step-by-step explanation:

One way for bank regulators to assure depositors that banks are not taking on too much risk is to require banks to do several things. Banks can diversify their loans or hold a greater proportion of their assets in bonds and reserves.

Moreover, bank regulation often includes reserve requirements, capital requirements, and specifically, restrictions on asset holdings. Thus, the correct option in the final answer is C) Restrict their asset holdings.