CIBF - Regulation 1

Which of the following is incorrect

• Through the 19th and 20th centuries there has been growth in limited liability firms where the owners only risked losing their investment in the firm

• At the start of the 19th century almost all firms had unlimited liability.

• Limited liability structure is a subsidy from the general public to the corporations

• When a limited liability company goes bankrupt both business creditors and individuals have losses that will never be repaid

Who said: “Stability is destabilizing”?

• John Maynard Keynes

• Milton Friedman

• Daniel Kahneman

• Hyman Minsky

• Robert Shiller

Which of the following is NOT correct: following the 1970s-1980s deregulation?

• Banks shift from business lending to mortgage lending, then to securitization

• SEC allows growth of money market funds (shadow banks) in the US

• US adopts UK style financial market regulation

• Banking corporations allowed to be London Stock Exchange members

• Growing financial instability leads to US Too Big to Fail policies and development of Basel capital accords

Which of the following is NOT correct about too big to fail universal banks

• Have unlimited liability

• Are brokers and dealers in financial markets

• Lend on mortgages

• Have traditional bank deposits and business lending activities

• Securitize assets such as mortgages

Which of the following are bank regulation tools after

2008 crisis? (More than 1 option)

• Structural separation

• Microprudential regulation

• Lender of last resort

• Macroprudential regulation

• Ring-fencing

Which of the following are tools of Financial market regulation? (More than 1 correct options)

• Supervision of investor information

• Supervision of market trading rules

• Supervision of investment funds

• Lender of last resort

• Structural separation

Which of the following is a characteristics of the period 1980s up to now?

• Era of strict regulation

• Era of deregulation

• Era of rapid growth

• Era of self-regulation within a strong legal framework

• Era of self-regulation within a weaker legal framework

Which of the following does NOT correctly reflect how Repo ties bank lending into financial markets and the price discovery process?

• Prior to 2008, banks lent on repo of corporate bonds and securitizations

• By funding the purchase and holding of these bonds, banks affect the demand for the bonds and their price

• As banks expand their balance sheets when they lend, they can lead to an asset price bubble

• When bank lending shrinks, asset prices increases

• Growth of repo is an ultimate breach in structural separation

Which of the following is INCORRECT?

• Market maker of last resort can result in financial crisis

• Central banks now know how to implement Market maker of last resort successfully

• Many regulators worry that markets are becoming reliant on Market maker of last resort

• Mandatory margin requirements may be used to limit reliance on repo