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Co insurance approach as adopted in the uk 1 mark the

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‘Co-insurance’ approach, as adopted in the UK (1 mark). Theamount of deposit insured under the scheme would be less than100 per cent (in the UK 90 per cent up to a maximum of £18,000).Depositors have greater incentives to monitor (because of thethreat of losing some of the deposits), but the percentage lost hasto be kept to a (low) level that gives the incentive not to join a run.Note that banks pay a flat rate premium linked to their amount ofdeposits. (Up to 2 marks for the description of this solution).
(d) What is the solution to the moral hazard problem arising from the ‘toobig to fail’ policy? (4 marks)
7
24 Principles of banking and finance
(e) What is the CAMEL system? (5 marks)
Question 4(a) What is meant by market risk and operational risk in relation tobanking? (6 marks)

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