Which of the Following Is NOT a Contractual Mechanism Used

question 75

Multiple Choice

Which of the following is NOT a contractual mechanism used by FIs to control credit risks?

• A)Diversifying across different types of risky borrowers.
• B)Requiring higher interest rate spreads for higher risk borrowers.
• C)Requiring more collateral for the bank over the assets of more risky borrowers.
• D)Making lending decisions only in centralized locations.
• E)Placing more restrictive covenants on the actions of more risky borrowers.

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Definitions:

Stress

A physical or psychological response to demands or pressures.

Hold Fetishes Sacred

The practice of considering certain objects with religious or mystical reverence, especially within cultural or spiritual contexts.

Carve

To cut into a material with the aim of shaping it into something.

Religion

A system of faith and worship often involving a belief in a supreme being or beings and following a prescribed set of rituals and moral codes.