15. In making loans to a single customer, commercial banks are not restricted to a maximum percentage of their capital, i.e. there is not a limit on how a bank to lend to a single customer. a. True b. False 16. The opening of a commercial bank in the United States a. requires a charter from the city in which they plan to operate requires a charter from a state or the federal government. c. None of these is correct b. d. always requires a charter from the federal government. 17. Current bank regulations: a. set requirements for the maximum amount of equity that banks can hold. b. None of the other answers are correct. c. impose standards for how liquid the bank is. d. involve a trade-off between the safety of the bank and the efficiency of bank operations. 18. The Basel framework recommends that banks maintain capital in proportion to their: a. None of the other answers is correct. b. total assets c. risk-weighted liabilities d. risk-weighted assets 9. The potential risk that financial problems can spread through financial institutions and the financial system is referred to as risk. a. Duration b. Systematic c. None of the other answers is correct. d. Market

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Regulation of Commercial Banks

The main function of any commercial bank is accepting deposits and lending money to borrowers. Apart from these two activities, commercial banks provide a host of other services to their customers, like discounting bills of exchange, acting as a custodian of a customer's will, and so on. In the absence of a proper regulatory framework or proper regulations in place, the commercial banks would have ended up charging exorbitant or varied rates of interest or service charges on the funds loaned by them or the services performed by them.