Question

what are some of the measures that can be put in place to prevent banks from collapsing

Answer 1

Some of the measures which can be put into place for avoiding another bank collapse would be-

A.there should be higher reserve requirements for the bank in order to counter the adverse economic scenarios they could protect them in such scenario.

B. There should be reduction of unnecessary risk taking on the part of banks to maximize their profits in order to survive and sustain through the adverse economic scenario to avoid a bank collapse.

C. Increasing of capital requirements for shadow banking and depository institutions in order to make the more effective and countercyclical.

D. Increase of consumer literacy and risk reduction plans by reducing leverage can also be effective in avoiding a financial collapse.

E. Regular monitoring and more integrated approach by central banks and monetary institutions in order to provide the banks with required capital at the time of adverse scenarios.

F. Holding with adequate amount of liquid assets in order to adequately manage the liabilities and avoiding the Asset liability mismatch