SSC CGL 2025 Tier 2Jan 2026Reading Comprehension
Bank Failures and Supervision

"Bank failures raise serious concerns about supervisory oversight." The case studies of Credit Suisse and Silicon Valley Bank highlight the deficiencies in supervisory supervision. In many instances, supervisors are hesitant to come into conflict with bank management when weaknesses are identified, preferring to do nothing rather than take corrective action at a point in time when key issues are building into a problem. Regulators must adopt an attitude change in which they place more emphasis on the results rather than the details. Overemphasis on trivial matters might lead regulators to overlook more fundamental issues, such as whether financial institutions have adequate capital in case of a shock.

Regulating requirements must be simplified. Complex regulation requirements in relation to capital may overlook systemic risk in their approaches when stress tests result in activities gravitating towards less heavily regulated institutions in the non-bank sector. Improved supervisory and bank communications would promote better supervision as a tool for managing risk. Recommendations include being up front about supervisory goals, openness to change within the bank organization, and increased transparency in supervisory contracts as a way of promoting swift problem resolution. These would aid shareholders as well as the overall economy.

In conclusion, rather than pursuing a micro-management strategy, a move towards a clearly defined regulation that supports positive incentives is what is needed to ensure that banks behave within frameworks that promote financial stability.

Why are supervisors often slow to act when banks have problems?

Answer और ExplanationAnswer and explanation

Answer: (D) They prefer to avoid conflict instead of fixing risks early.

passage कहता है कि supervisors "are hesitant to come into conflict with bank management" और "preferring to do nothing rather than take corrective action"। इसलिए D सही उत्तर है। विकल्प C स्वाभाविक लगता है, पर passage यह कभी नहीं कहता कि उनके पास कानूनी शक्ति (legal power) की कमी है।

The passage says supervisors "are hesitant to come into conflict with bank management", "preferring to do nothing rather than take corrective action". So D is right. Option C sounds natural, but the passage never says they lack legal power.

बाकी Options उत्तर क्यों नहीं हैंWhy the other options are not the answer

A'a secret strategy to keep their contracts private' धीमेपन का संदेहपूर्ण कारण प्रतीत हुआ। परंतु passage गोपनीयता या अनुबंधों का उल्लेख नहीं करता; supervisors बैंक प्रबंधन से टकराव से बचते हैं।'a secret strategy to keep their contracts private' sounds like a cynical reason for slowness. But the passage never mentions secrecy or contracts; supervisors avoid conflict with bank management.
B'modern bank rules are too simple' भ्रम का कारण प्रतीत हुआ। परंतु passage यह नहीं कहता कि नियम सरल हैं; वह कहता है कि supervisors टकराव से बचने हेतु कुछ न करना पसंद करते हैं।'modern bank rules are too simple' looks like a cause of confusion. But the passage does not say rules are simple; it says supervisors prefer doing nothing to avoid conflict.
C'do not have the legal power to stop a financial crash' कमज़ोर पर्यवेक्षकों के लिए स्वाभाविक प्रतीत हुआ। परंतु passage यह नहीं कहता कि उनके पास शक्ति नहीं है; वे टकराव से झिझकते हैं।'do not have the legal power to stop a financial crash' sounds natural for weak supervisors. But the passage never says they lack power; they are hesitant to come into conflict.

Source: SSC CGL 2025 Tier 2 · Jan 2026। Solution: Prashant Sir, Ramban।Source: SSC CGL 2025 Tier 2 · Jan 2026. Solution by Prashant Sir, from Ramban.