Banking · Risk Management & Concentration Risk
In a lending institution, concentration risk is treated as distinct from ordinary credit risk because even sound individual exposures may create vulnerability if too much exposure accumulates in one area. Concentration risk arises mainly when:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1treasury income falls below budgeted levels
- 2provisioning levels exceed regulatory minimums
- 3the institution has too many small retail accounts
- 4exposures are heavily clustered by borrower, group, sector, geography, or instrument✓
Correct answer
exposures are heavily clustered by borrower, group, sector, geography, or instrument
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