ECON201 Lecture Notes - Lecture 10: Financial Regulation, Systemic Risk, Arbitrage
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1. identify the reasons for and the forms of a government safety net in financial markets. 2. list and summarize the types of financial regulation and how each reduces asymmetric information problems. Contagion effect the risk that financial difficulties at one or more banks(s) spill over to a large number of other banks or the financial system as a whole. The bank is allow to fail and depositors are paid off according to cdic regulations. Once the bank"s assets have been liquidated, other creditors are paid off in some proportions. Another bank takes over the liabilities of the failed bank. An important function of the bank of canada. Boc can lend to banks to avert a financial crisis and maintain the stability of the financial sector. The chance that an individual will have an incentive to act in a way detrimental to another party.