Banking · Retail Risk Management
A private bank observes a steep jump in delinquency rates in its unsecured personal loan segment. Simultaneously, its Cost-to-Income ratio has risen. The bank relies on a credit scoring model updated long ago and operates under a horizontal branch structure amid inflationary pressures. What is the most critical systemic flaw in the bank's retail strategy?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Hiring recovery agents instead of using automated AI-driven collection bots.
- 2Over-exposure to the home loan segment which is sensitive to interest rate hikes.
- 3The failure to update the credit scoring model to reflect current economic realities and inflation impacts.✓
- 4The use of the 'Horizontal Model' which prevents specialization in the high-risk recovery process.
Correct answer
The failure to update the credit scoring model to reflect current economic realities and inflation impacts.
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