One of the most important concepts discussed in the text is the moral hazard problem. Even though this problem cannot be eliminated completely, it can be reduced through various actions such as the Basel Agreements.

I have figured students find moral hazard very interesting and intellectually stimulating. You may submit a summary of these agreements (Basel I and II) using the Web site of the Bank of International Settlements. Additionally; briefly explain the moral hazard concept and summarize the three pillars of the Basel Agreements, which are:

a. Minimum capital requirement

b. Supervisory review process

c. Market discipline