Read the following passage carefully and answer the questions based on the passage: "Bank failures raise serious concerns about supervisory oversight." The case studies of Credit Suisse and Silicon Valley Bank highlight the deficiencies in supervisory supervision. In many instances, supervisors are hesitant to come into conflict with bank management when weaknesses are identified, preferring to do nothing rather than take corrective action at a point in time when key issues are building into a problem. Regulators must adopt an attitude change in which they place more emphasis on the results rather than the details. Overemphasis on trivial matters might lead regulators to overlook more fundamental issues, such as whether financial institutions have adequate capital in case of a shock. Regulating requirements must be simplified. Complex regulation requirements in relation to capital may overlook systemic risk in their approaches when stress tests result in activities gravitating towards less heavily regulated institutions in the non-bank sector. Improved supervisory and bank communications would promote better supervision as a tool for managing risk. Recommendations include being up front about supervisory goals, openness to change within the bank organization, and increased transparency in supervisory contracts as a way of promoting swift problem resolution. These would aid shareholders as well as the overall economy. In conclusion, rather than pursuing a micro-management strategy, a move towards a clearly defined regulation that supports positive incentives is what is needed to ensure that banks behave within frameworks that promote financial stability.
What would "positive incentives" do for the banking system?
Help banks behave in a way that keeps the economy stable.
The question asks what "positive incentives" in the recommendations are meant to achieve.
The passage's recommendations, being up front about supervisory goals, openness to change, and greater transparency, are aimed at swift problem resolution and better management of risk.
The whole thrust of the argument is that supervision should steer banks toward sound, stable behaviour rather than police tiny details.
So positive incentives are designed to guide banks to behave in ways that keep the wider economy stable, which is option (4).
Option (1), making rules more complicated, runs against the call to simplify. Option (2), reviving micro-management on tiny details, is precisely what the author wants to move away from.
Option (3), stopping banks and regulators from talking, contradicts the recommendation for improved communication and transparency.
Positive incentives would Help banks behave in a way that keeps the economy stable.
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Important Questions from Reading Comprehension
Why, according to the writer can't people be motivated to use a resource prudently?
1. They feel that others may overuse the resource
2. It is possible to substitute the resource
3. Abundance of the resource availability
Select the correct answer using the code given below:
When do people use resources exhaustively?
The self-interest of people affects the use of renewable resources
People rooted in a locality
Which among the following is closest in meaning with the word 'deplete'?
