Practice question · Multiple choice
Post-crisis regulation raised bank capital requirements substantially. Why does that not make another financial crisis impossible?
Hints
- Ask what AAA-rated mortgage tranches were considered before 2007.
- What does a rule have to name in order to constrain it?
Show the answer
D. Because buffers absorb known risks and crises come from unknown
Why
Rules bind what is measured, and the next crisis grows where nothing is being measured. Higher capital genuinely helps and genuinely does not close the question.
Practise The Global Financial Crisis
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More questions on The Global Financial Crisis
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- Match each GFC concept to its meaning.