Banking · Credit Risk Management
What is the primary factor that determines the effectiveness of a security/collateral in mitigating a bank's credit risk?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The frequency of physical inspections conducted by the branch manager
- 2The ease and speed with which the bank can liquidate the security without legal impediments or significant loss✓
- 3The complex legal jargon used to draft the loan agreement
- 4The security's original purchase price or historical cost
Correct answer
The ease and speed with which the bank can liquidate the security without legal impediments or significant loss
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