The ability to provide loan commitments is a signal to borrowers that the FI has a lower risk portfolio.

Question

Quizplus · Accepted Answer

By providing loan commitments, the FI is showing its willingness to lend and its confidence in its ability to manage its risk. This indicates to borrowers that the FI has a lower risk portfolio, as it is willing to lend to them and is confident in its ability to manage the associated risks.

The Ability to Provide Loan Commitments Is a Signal to Borrowers