Lesson M5.3.1

M5.3.1 Financial regulation and the role of a central bank Quiz: OCR Economics, Unit 10

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson M5.3.1, Financial regulation and the role of a central bank: 20 multiple choice questions for the OCR Economics (H460), Unit 10: The financial sector, written with Revision Ninja.

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The 20 questions

  1. Which organisation is responsible for macroprudential regulation and identifying systemic risks in the UK economy?

    • Monetary Policy Committee
    • Prudential Regulation Authority
    • Financial Policy Committee
    • Financial Conduct Authority

  2. Which UK body is responsible for microprudential regulation of individual banks?

    • Competition and Markets Authority
    • Monetary Policy Committee
    • Financial Conduct Authority
    • Prudential Regulation Authority

  3. Which UK body regulates conduct of business to ensure fair treatment for retail consumers?

    • Monetary Policy Committee
    • Financial Policy Committee
    • Financial Conduct Authority
    • Prudential Regulation Authority

  4. What term describes the risk that the failure of one financial institution triggers widespread system collapse?

    • Liquidity risk
    • Systemic risk
    • Regulatory capture
    • Moral hazard

  5. What market failure occurs when central bank bailouts encourage commercial banks to take excessive risks?

    • Systemic risk
    • Moral hazard
    • Regulatory capture
    • Adverse selection

  6. What reform forces UK commercial banks to separate retail banking from higher-risk investment banking?

    • Capital adequacy
    • Ring-fencing
    • Quantitative easing
    • Macroprudential regulation

  7. What central bank role provides emergency liquidity during a sudden bank run?

    • Financial ombudsman
    • Monetary authority
    • Macroprudential regulator
    • Lender of last resort

  8. Which asset ratio requires banks to hold sufficient liquid assets to withstand a 30-day stress scenario?

    • Liquidity coverage ratio
    • Reserve ratio
    • Leverage ratio
    • Capital adequacy ratio

  9. What type of assets must a bank increase to satisfy higher Tier 1 capital adequacy requirements?

    • Ordinary equity
    • Short-term loans
    • Corporate bonds
    • Interbank borrowings

  10. A central bank buys government bonds from commercial banks using newly created electronic money. What is this policy?

    • Ring-fencing
    • Forward guidance
    • Quantitative easing
    • Liquidity ratio

  11. When regulators act in the interests of the banks they supervise rather than the public, what occurs?

    • Regulatory capture
    • Adverse selection
    • Moral hazard
    • Systemic risk

  12. Which interest rate is set by the Bank of England on reserves held by commercial banks?

    • Mortgage rate
    • Yield rate
    • LIBOR
    • Bank rate

  13. A bank holds £10m in equity against £100m in risk-weighted assets. What is its capital ratio?

    • 90%
    • 10%
    • 1%
    • 100%

  14. Unregulated non-bank institutions providing credit services outside traditional financial regulations are known as what system?

    • Central banking
    • Shadow banking
    • Commercial banking
    • Retail banking

  15. Which report led to the implementation of structural ring-fencing rules in the UK banking sector?

    • Beveridge Report
    • Vickers Report
    • Mirrlees Review
    • Stern Review

  16. What situation occurs when high interest rates selectively attract higher-risk borrowers, increasing bank default risks?

    • Liquidity trap
    • Adverse selection
    • Regulatory capture
    • Moral hazard

  17. Which macroprudential tool requires banks to build capital buffers during economic booms?

    • Quantitative easing
    • Reserve requirement
    • Base rate
    • Countercyclical capital buffer

  18. What scenario occurs when interest rates are so low that further monetary easing fails to boost borrowing?

    • Financial contagion
    • Regulatory failure
    • Credit crunch
    • Liquidity trap

  19. Which ratio measures a bank's capital against its total unweighted assets to prevent excessive leverage?

    • Reserve ratio
    • Liquidity coverage ratio
    • Capital adequacy ratio
    • Leverage ratio

  20. What term describes the spreading of financial distress from one institution or market to another?

    • Moral hazard
    • Adverse selection
    • Financial contagion
    • Regulatory capture

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