Principles of Macroeconomics / Unit 12 MAC 1105 short lesson, about 20 seconds
Bank Regulation: Three Arms
Captions available
The idea
Regulation works through three instruments. Reserve requirements set what must be held. Capital requirements set a minimum net worth as a share of assets. And investment restrictions limit what banks may own.
In practice
Banks may lend and hold government securities, and may not hold corporate stock.
Where people slip
Valuing a bank's assets is genuinely hard, which makes supervision hard.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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