Banking · Credit Risk
Credit risk occupies a central place in financial intermediation because lenders part with funds today based on the expectation of timely repayment in the future. Which of the following best describes credit risk?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The possibility that changes in market prices will reduce the value of a bank's treasury portfolio
- 2The possibility that a borrower or counterparty will fail to meet contractual payment obligations✓
- 3The possibility that an employee will commit fraud in a branch office
- 4The possibility that inflation will reduce real returns on savings
Correct answer
The possibility that a borrower or counterparty will fail to meet contractual payment obligations
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