context for compensation. That is why, in part, our executive management team elected not to receive a bonus in 2008, even though the firm produced a profit.
More generally, we should apply basic standards to how we compensate people in our industry. The percentage of the discretionary (任意的)bonus awarded in equity should increase significantly as an employee's total compensation increases. An individual's performance should be evaluated over time so as to avoid excessive risk-taking. To ensure this, all equity awards need to be subject to future delivery and/or deferred exercise. Senior executive officers should be required to retain most of the equity they receive at least until they retire, while equity delivery schedules should continue to apply after the individual has left the firm.
Limitations of self regulation
For policymakers and regulators, it should be clear that self-regulation has its limits. We rationalized and justified the downward pricing of risk on the grounds that it was different. We did so because our self-interest in preserving and expanding our market share, as competitors, sometimes blinds us -- especially when exuberance is at its peak. At the very least, fixing a system-wide problem, elevating standards or driving the industry to a collective response requires effective central regulation and the convening power of regulators.
Capital, credit and underwriting standards should be subject to more\Regulators should consider the regulatory inputs and outputs needed to ensure a regime that is nimble and strong enough to identify and appropriately constrain market excesses,
particularly in a sustained period of economic growth. Just as the Federal Reserve adjusts interest rates up to curb economic frenzy, various benchmarks and ratios could be appropriately calibrated. To increase overall transparency and help ensure that book value really means book value, regulators should require that, all assets across financial institutions be similarly valued. Fair value accounting gives investors more clarity with respect to balance sheet risk.
The level of global supervisory co-ordination and communication should reflect the global interconnectedness of markets. Regulators should implement more robust information sharing and harmonized disclosure, coupled with a more systemic, effective reporting regime for institutions and main market participants. Without this, regulators will lack essential tools to help them understand levels of systemic vulnerability in the banking sector and in financial markets more broadly.
In this vein, all pools of capital that depend on the smooth functioning of the financial system and are large enough to be a burden on it in a crisis should be subject to some degree of regulation.
1. Which organization should be responsible for proper operation of the broader financial system?
A) Commercial banks. B) Financial institutions. C) The ministry of finance. D) The Wall Street. 答案:B
[定位] 由题干中的be responsible for proper operation of the broader financial system可以定位到第二段第一句Financial institutions have an obligation to the broader financial
system．
[精解] 题干中的be responsible for和定位句中的have an obligation to属于同义转述，都表示“对……负责”；结合定位句和题干，可知本题答案为B)。
2. In order to comprehensively reflect the state of economy, we must research deeply to enhance and improve ______.
A) scenario analysis and stress testing B) risk management assumptions C) prediction on financial risk D) multiple standard deviation events 答案:A
[定位] 根据题干中的comprehensively reflect the state of economy 和 research deeply to enhance and improve可以定位到第一个小标题下第二段最后一句Our industry must do more to enhance and improve scenario analysis and stress testing．
[精解] 定位句中讲到必须加强和改善情景模拟分析和压力测试；而该段阐述了风险管理不能完全依靠历史数据来预测，并指出了历史数据预测的局限性，不能反映经济的真实结果分布。因此应加强scenario analysis and stress testing研究以反映经济最真实的分布。所以本题答案为A)。
3. Many financial institutions and investors usually perform risk analysis by ______. A) undertaking themselves B) third-party agencies
C) outsourcing to rating agencies D) risk management institutions 答案:C
[定位] 由题干中的Many financial institutions and investors和perform risk analysis可以定位到第一个小标题下第三段第一、二句Second，too many financial institutions and investors
simply outsourced their risk management．Rather than undertake their own analysis，they relied on the rating agencies to do the essential work of risk analysis for them． [精解] 由定位句可知大多金融机构和投资者只是将他们的风险管理外包给风险评级机构，而不是自己进行分析。故本题答案为C)。
4. What was the consequence of an over-reliance on credit ratings?
A) Increasing triple A companies. B) Declining trustworthiness on rating agencies. C) Deficiency in credit judgments. D) Collapse of financial institutions. 答案:B
[定位] 由题干中的田lover-reliance on credit ratings定位到第一个小标题下第四段第一句This over-dependence on credit ratings coincided with the dilution of the desired triple A-rating．
[精解] 题干中的an over-reliance on credit ratings与原文中的over-dependence on credit ratings属于同义转述；文中的dilution意思是“稀释，冲淡”；定位句意为“这种对信用评级的过度依赖会降低他们渴望的3A评级的可信性”，由此可知本题答案为B)。
5. When the Long-Term Capital Management was disintegrated, the products initiated to counterweigh risks were ______.
A) various basket indices and credit default swaps B) hedge fund and forward rate agreements
C) credit-linked notes D) current swaps and rates swaps 答案:A
[定位] 由题干中的the Long-Term Capital Management 和 initiated to counterweigh risks
可以定位到文章的第一个小标题下的第六段第二句After the collapse of Long-Term Capital Management and the crisis in emerging markets in 1998，new products such as various basket indices and credit default swaps were created to help offset a number of risks． [精解] 题干中的disintegrated和文章中的collapse具有相同的意思；文章中的be created to和题干中的initiated to属于同义词；文章中的offset和题干中的counterweigh都有“抵消，平衡”的意思；分析文章可知， new products指的就是such as所引入的部分，即various basket indices and credit default swaps。所以本题答案为A)。
6. Operational risks caused by comparatively weakened operational capacity on increasing new instruments have influence on ______.
A) the operating income of companies B) the capability to withstand risks
C) the structure of companies' assets D) the overall stability of the financial system 答案:D
[定位] 由题干中的Operational risks，weakened operational capacity 和 have influence on定位到第一个小标题下的第八段第二、三句The industry let the growth in new instruments outstrip(超过)the operational capacity to manage them．As a result，operational risk increased dramatically and this had a direct effect on the overall stability of the financial system．
[精解] 定位句中的have a direct effect on和题干中的have influence on属于同义转换，所以其后所跟的 the overall stability of the financial system即是本题的答案所在，故本题答案为D)。
7. The author believes that financial institutions can reduce credit crisis if ______. A) positions and commitments were initially assessed precisely