Topic 7 Part 2

What is foreign debt crisis?

• A foreign company fails to repay the debt

• Banking crisis caused by a political turmoil

• A government is unwilling to repay the loan

• Debt crisis between banks in a banking system

What is the key difference between bank crisis and financial crisis?

• The types of financial institution involved

• The type of loans defaulted

• The number of countries affected

• The severity of bank runs

What triggers banking problems?

• Reduction in bank customers

• Increase in bank capital

• Reduction in bank asset values

• Increase in bank stability

The following are the criteria of a systemic banking crisis EXCEPT

• The liquidation of banks' assets by the regulator

• Increased probability of bank runs

• Massive policy intervention by the government

• Increased bank capital position

Government injects capital into banks by purchasing bank shares is the example of?

• Significant asset purchases

• Significant bank nasionalisation

• Extensive liquidity support

• Bank restructuring

What is the meaning of microeconomic factors that lead to a crisis?

• Factors that come from the market

• Factors that come from bank specific problems

• Factors that come from microcredit problems

• Factors that come from a banking system structure

Which from the following best describes principal-agent incentive problem in bank management?

• Bank managers increase bank safety according to Board of Director instructions

• Bank managers take additional risks to gain more rewards on the loans disbursed

• Bank managers adhere to the shareholder instructions to pay dividends

• Bank managers keen to diversify their loan portfolio

Unnecessary number of staff is a problem related to?

• Macroeconomic reason

• Microeconomic reason

• Stability reason

• System-related reason

How does competition increase the risk of financial/banking crisis?

• Lack of incentive for incumbent banks to operate efficiently

• The improvement on foreign bank products and services

• Lack of cooperation between local banks

• Lack of supervision by the regulator

What is the impact of crises on an economy?

• Reduction in banking risk

• Reduction in national output

• Reduction in bank managers' incentives

• Reduction in regulatory involvement in regulating banks