Banking Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The Dodd-Frank Act primarily aims to regulate proprietary trading practices alongside various aspects of the financial system to enhance stability and consumer protection. Enacted after the 2008 financial crisis, this legislation addresses risky behaviors by financial institutions that were believed to contribute to the crisis, specifically focusing on the excessive risk-taking in proprietary trading, which is when banks trade financial instruments for their own profit rather than on behalf of customers.

This act implemented measures such as the Volcker Rule, which restricts banks from engaging in proprietary trading and limits their investments in hedge funds and private equity. By regulating these practices, the Dodd-Frank Act seeks to reduce the potential for systemic risk that can arise from high-risk trading activities, ultimately protecting consumers and the overall economy.

In contrast, the other options, such as bank mergers, credit unions operations, and mutual fund distribution, while they are also part of the financial regulatory landscape, are not the primary focus of the Dodd-Frank Act. The act does address various banking regulations, but its main objective revolves around curbing risky trading practices to prevent future financial instability.