THE UNITED REPUBLIC OF TANZANIA MINISTRY OF EDUCATION, SCIENCE AND TECHNOLOGY MZUMBE UNIVERSITY (CHUO KIKUU MZUMBE) SCHOOL OF BUSINESS 15% TEST: 22 June, 2022 Course Code: FIN 5213 Course Name: FINANCIAL INSTITUTIONS Programme: MSc A&F Date: 22/06/2022 Time: 1700 – 2000 HRS INSTRUCTIONS 1. There are TWO (2) questions in this examination. 2. Answer ALL questions 3. All questions carry equal marks. QUESTION ONE (10 MARKS) The main purpose of financial regulation is to make more information available for market participants, and hence protect investors from adverse selection, reduce the asymmetry of information, and ensure the soundness of financial intermediaries. To protect the public and the economy from financial panics, the government of the United Republic of Tanzania implement six types of regulations: restrictions on the entry of financial intermediaries, stringent reporting requirements for financial intermediaries, restrictions on assets and activities of financial intermediaries, insurance of people’s deposits by the government if the financial intermediary should fail, limitations on competition among financial intermediaries, and restrictions on interest rates that can be paid on deposits by financial intermediaries. Yet, these financial intermediaries play a crucial role in an economic crisis–they are responsible for both causing the market to crash and then helping it recover from the crisis. Required: Discuss how economic crises manifest at the level of financial intermediaries. QUESTION ONE (05 MARKS) Many countries have a very similar set-up of central banks' responsibilities such as Financial Market Stability, Monetary Policy and issuing currency. The central authority of the Tanzania money and banking system is the Board of Directors of the Bank of Tanzania. Required: Critically describe the purpose and membership of the Board of Directors of the Bank of Tanzania.