Banking Awareness - Banking Acts, Reforms & Risk Management
Which type of risk increases when a bank lends heavily to a single borrower or sector?
Which type of risk increases when a bank lends heavily to a single borrower or sector?
medium Q15 of 15
Step-by-Step Solution
Step 1: Identify the lending pattern
High exposure to one borrower or sector increases default impact.Step 2: Match with the risk type
Risk arising from borrower concentration is credit risk.Final Answer:
Credit risk → Option AQuick Check:
Loan concentration raises credit risk ✅
Quick Trick: Higher exposure to borrowers = higher credit risk.
Common Mistakes:
MISTAKES- Linking loan concentration with liquidity risk.
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