Which of the following could be used to reduce a bank's credit risk exposure?
I. Increase its loan to deposit ratio
II. Increase its allowable concentration ratio
III. Increase its required minimum credit score
IV. Participate in loans in other geographic areas

Question

Which of the following could be used to reduce a bank's credit risk exposure? 
I. Increase its loan to deposit ratio
II. Increase its allowable concentration ratio
III. Increase its required minimum credit score
IV. Participate in loans in other geographic areas

Quizplus · Accepted Answer

Increasing the required minimum credit score would reduce the likelihood of lending to borrowers who may default, thus reducing credit risk. Participating in loans in other geographic areas can diversify the bank's loan portfolio, spreading out risk and potentially reducing exposure to localized economic downturns.

Which of the Following Could Be Used to Reduce a Bank's