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The main ways in which banks can meet countercyclical capital buffer requirements include:
- Reduce their voluntary capital buffers, leaving overall capital ratios unchanged.
- Raise capital, through equity issues or higher retained earnings.
- Reduce risk-weighted assets, by reducing exposures (including lending).
- Rebalancing away from higher risk-weighted assets.
- All of the answers.
Which of the following represent off-balance-sheet activities of commercial banks?
- A customer deposits $1 million in a regular bank deposit account.
- A customer chooses to transfer the deposit to a money market mutual fund account sponsored by the same bank.
- The bank makes a loan for $1 million.
- The bank securitizes the loan as a pool of loans that are sold off to investors.
- Both (b) and (d).
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