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Answer: Deposit insurers charge risk-based premiums.
**Risk-based deposit insurance premiums** are designed to address moral hazard by charging banks higher premiums when they engage in riskier activities. This creates an incentive for banks to manage their risk more prudently, as they will pay more for insurance if they take excessive risks. The other options either exacerbate moral hazard (C) or are unrelated to addressing it (B, D).
Author: LeetQuiz .
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Which of the following actions in the banking system is most likely intended to address the problem of moral hazard?
A
Deposit insurers charge risk-based premiums.
B
Banks increase loans to higher-risk borrowers.
C
Governments implement deposit insurance programs.
D
Banks increase the interest rates they offer to depositors.