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Unformatted text preview: ECON 330: Money and Banking Fall 2007 Section 1: Tuesday and Thursday, 11:30AM-12:45PM, SMU 104 Section 2: Tuesday and Thursday, 5:00PM-6:15PM, SRO B Prof. J. Santos South Dakota State University Student Learning Objectives: Chapter 11: Economic Analysis of Banking Regulation  Recognize, but not state verbatim, the seven broad categories of U.S. banking regulation.  Summarize the type of banking regulation that falls under the category Government Safety Net.  Banks are particularly well suited to solving adverse selection and moral hazard problems because they make private loans that help avoid the free-rider problem. However, this solution to the free-rider problem creates another asymmetric information problem: Depositors lack information about the quality of these private loans. Identify two reasons why the banking system might not function well in the presence of this asymmetric information.  Identify the untended consequences &adverse selection and/or moral hazard &of government safety net legislation.  Summarize the types of banking regulation that falls under the categories Restrictions on Asset Holdings and Bank Capital Requirements.  Explain brie¡y the essence of the Basel Accord¢s risk-based capital requirements.  Compare and contrast the e£ectiveness (in terms of keeping a bank solvent) of risk-based capital requirements and simple-leverage-ratio-based capital requirements.  Summarize the types of banking regulation that falls under the category Bank Supervision: Chartering and Examination.  Identify the asymmetric information problem - adverse selection and/or moral hazard - that chartering and examination legislation seeks to address.  Summarize the type of banking regulation that falls under the category Assessment of Risk Management.  Identify the acronym CAMELS.  Explain brie&y the purpose of a CAMELS rating and a call report.  Bank examiners now place far greater emphasis on evaluating the soundness of a bank¡s management processes with regard to controlling risk. Bank examiners now give banks a separate risk management rating from 1 to 5; this rating feeds into the overall management rating as part of the CAMELS system. Recognize, but not state verbatim, the four elements of sound risk management on which regulators assess banks in order to come up with the risk management rating.  Summarize the type of banking regulation that falls under the category Disclosure Requirements.  Summarize the type of banking regulation that falls under the category Consumer Protection.  Summarize the type of banking regulation that falls under the category Restrictions on Competition.  Explain brie&y the purpose of Truth in Lending legislation as mandated under the Consumer Protection Act of 1969....
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- Spring '08
- Basel II, Capital requirement, government safety net, Banking and Financial Markets