7 Bank capital Which of the following best explains why bank

7. Bank capital Which of the following best explains why bank executives may want to hold the lowest possible level of bank capital? O Bank executives can more easily offset a declne in assets if the level of bank capital is lower. O The level of bank capital should be high enough to write down nonperforming assets. D Lower OA lower lvel of bank capital ensures banks have to pay less in taxes. Love r level of bank capital means high levels of compensation for bank executives

Solution

Holding the low level of bank capital implies that we are lending a greater proportion of the bank\'s capital to the general public or borrowers implying the higher potential of revenue for the bank.

Thus, Lower level of bank capital means high level of compensation for the bank executives.