SSC CGL 2025 Tier-II · Paper-I, 19 January 2026 · English Language and Comprehension · Question 37 of 150

We transcribed this text from the pictures of a candidate's response sheet for this paper; the answer is the key SSC marked with a green tick on that sheet. Solution last reviewed 11 September 2026.

Read the following passage carefully and answer the questions based on the passage:
"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.

The use of "stress tests" by the author is an example of illustrating which of the following consequences?

(a)The failure of financial institutions to report their internal capital requirements accurately.
(b)The movement of risk-related financial activities into industries that are less heavily regulated.
(c)The direct relationship between complex regulatory obligations and long-term stability.
(d)The enhanced clarity of communication between shareholders and bank managers.

Answer

Why

Correct — B. Stress tests appear in this sentence: '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.'

Result in names the consequence: activities gravitating towards less heavily regulated institutions.

Option (b) says the same in its own words: movement into less heavily regulated industries.

Why the others are wrong

(a)
The failure of financial institutions to report their internal capital requirements accurately. — The passage asks whether institutions 'have adequate capital', but never says they misreport capital requirements. Stress tests are tied to activities moving, not to reporting.
(c)
The direct relationship between complex regulatory obligations and long-term stability. — Reverses the point. Complex requirements 'may overlook systemic risk', so the passage links complexity to risk, not to long-term stability.
(d)
The enhanced clarity of communication between shareholders and bank managers. — Communication is paragraph three's topic, between supervisors and banks, and it is not linked to stress tests. The stress-test sentence is about where activities move.

Concept

An illustration question asks what an example is used to show. Find the sentence where the term appears and read what it leads to.

Here the verb does the work: stress tests 'result in activities gravitating towards less heavily regulated institutions in the non-bank sector'. That movement is the consequence.

It backs the paragraph's claim that complex rules can miss systemic risk: the activity moves to where the rules are lighter.

Key facts

'Result in' introduces an effect, and 'result from' a cause.
Gravitate towards: to move steadily towards, as if pulled.
Systemic risk is the risk of trouble spreading through the whole financial system, not staying in one institution.

Study next

Illustration and example questions in argumentative passagesCause-effect verbs: result in, lead to, stem fromBanking terms in comprehension: capital adequacy, stress test, systemic risk

Common traps

Choosing option (c) because the passage discusses complexity and stability — it says complexity overlooks risk.
Choosing option (d) by matching 'communication' from a different paragraph.

The same stress-test sentence decides 19 Jan 2026, 11:00 AM, English Q.40, where the author's tone toward complex regulation is critical.

Related PYQs

No directly related past PYQ was found.

Read the following passage carefully and answer the questions based on the passage:
"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.