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.
Why are supervisors often slow to act when banks have problems?
They prefer to avoid conflict instead of fixing risks early.
The question asks why supervisors are slow to act on emerging problems, and the passage answers this almost directly.
It says supervisors "are hesitant to come into conflict with bank management when weaknesses are identified", and they prefer "to do nothing rather than take corrective action" even as key issues build into a problem.
That describes a reluctance to confront bank management, so the delay is driven by conflict-avoidance rather than any other cause.
This matches option (4), that they prefer to avoid conflict instead of fixing risks early.
Option (1), a secret strategy to keep contracts private, is not stated; secrecy is not the reason given. Option (2), confusion from over-simple rules, contradicts the text, which criticises rules for being too complex.
Option (3), lacking legal power, is never claimed; the problem is willingness, not authority.
Supervisors are slow to act because They prefer to avoid conflict instead of fixing risks early.
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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'?
