Final answer:
Bank regulations are designed to prevent excessive risk, requiring banks to hold a certain percentage of deposits as reserves and restricting their investment options to protect depositors.
Step-by-step explanation:
Bank regulation is a critical aspect of maintaining a bank's solvency and involves various categories such as reserve requirements, capital requirements, and restrictions on the types of investments. To ensure that banks are capable of covering depositors' withdrawals, they are mandated to hold a certain percentage of deposits as reserves, which can be either cash in the bank or deposits at the Federal Reserve. In addition to this, restrictions are set to limit the riskiness of banks' investment choices, allowing them to make loans and purchase U.S. Treasury securities but prohibiting investment in the stock market and similarly risky assets.