Tell me if im wrong but wouldn't putting a cap on interest rates cause a rise in excessive risk taking because the bank is trying to profit maximise therefore for the bank to increase profits, they will need to increase the amount they loan to get a greater return back?
In theory yes, however if you look at the 2008 finical crisis if firms lend to high risk borrowers the incentive isn’t there to lend as they don’t have the profit motive, firms only want to lend to high risk borrowers if they can make large gains. In 2008 banks where lending to high risk lenders due to high interest rates, but also because they knew with the high interest prices and rising house price even if so,some default on there debt they could cover there debt
In theory yes, however if you look at the 2008 finical crisis if firms lend to high risk borrowers the incentive isn’t there to lend as they don’t have the profit motive, firms only want to lend to high risk borrowers if they can make large gains. In 2008 banks where lending to high risk lenders due to high interest rates, but also because they knew with the high interest prices and rising house price even if so,some default on there debt they could cover there debt
In theory yes, however if you look at the 2008 finical crisis if firms lend to high risk borrowers the incentive isn’t there to lend as they don’t have the profit motive, firms only want to lend to high risk borrowers if they can make large gains. In 2008 banks where lending to high risk lenders due to high interest rates, but also because they knew with the high interest prices and rising house price even if so,some default on there debt they could cover there debt.
In theory yes, however if you look at the 2008 finical crisis if firms lend to high risk borrowers the incentive isn’t there to lend as they don’t have the profit motive, firms only want to lend to high risk borrowers if they can make large gains. In 2008 banks where lending to high risk lenders due to high interest rates, but also because they knew with the high interest prices and rising house price even if so,some default on there debt they could cover there debt
@@MCart1215 deregulation isn't regulation, i think the title is a bit misleading but the majority of the polices listed here (regulatory policies) are there to prevent systemic risk.
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Tell me if im wrong but wouldn't putting a cap on interest rates cause a rise in excessive risk taking because the bank is trying to profit maximise therefore for the bank to increase profits, they will need to increase the amount they loan to get a greater return back?
In theory yes, however if you look at the 2008 finical crisis if firms lend to high risk borrowers the incentive isn’t there to lend as they don’t have the profit motive, firms only want to lend to high risk borrowers if they can make large gains. In 2008 banks where lending to high risk lenders due to high interest rates, but also because they knew with the high interest prices and rising house price even if so,some default on there debt they could cover there debt
In theory yes, however if you look at the 2008 finical crisis if firms lend to high risk borrowers the incentive isn’t there to lend as they don’t have the profit motive, firms only want to lend to high risk borrowers if they can make large gains. In 2008 banks where lending to high risk lenders due to high interest rates, but also because they knew with the high interest prices and rising house price even if so,some default on there debt they could cover there debt
In theory yes, however if you look at the 2008 finical crisis if firms lend to high risk borrowers the incentive isn’t there to lend as they don’t have the profit motive, firms only want to lend to high risk borrowers if they can make large gains. In 2008 banks where lending to high risk lenders due to high interest rates, but also because they knew with the high interest prices and rising house price even if so,some default on there debt they could cover there debt.
In theory yes, however if you look at the 2008 finical crisis if firms lend to high risk borrowers the incentive isn’t there to lend as they don’t have the profit motive, firms only want to lend to high risk borrowers if they can make large gains. In 2008 banks where lending to high risk lenders due to high interest rates, but also because they knew with the high interest prices and rising house price even if so,some default on there debt they could cover there debt
So deregulation is a type of regulation? Seems a bit counter intuitive.
yeah i dont get it
Neither
@@MCart1215 deregulation isn't regulation, i think the title is a bit misleading but the majority of the polices listed here (regulatory policies) are there to prevent systemic risk.
@@YEJ chances of paper 3 being a financial markets? Ngl I think it would be decent as there are quite a few that just ignore it
@@MCart1215 yeah I think it’s either financial markets or it will be labour markets/ or development for AQA
Do we need to know this for Edexcel A economics?
Yes you do it is in your spec 'Role of Central Bank in regulation of the banking industry' Types of regulation will fit into this
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this was not on my specification, is it still possible to get an essay question on this??
cannot use my gov name in my cgp book it says for all exam boards so I guess do