Banks reduce credit risk by:
A)lowering interest rates and issuing new stock.
B)borrowing Fed funds and providing ATMs.
C)requiring collateral and selling loans.
D)matching maturities and holding reserves.

Question

Quizplus · Accepted Answer

Requiring collateral and selling loans are methods used by banks to reduce credit risk. Collateral provides security in case the borrower defaults on the loan, while selling loans allows the bank to transfer the risk to another party. Lowering interest rates, issuing new stock, borrowing Fed funds, providing ATMs, and matching maturities and holding reserves may have other benefits for the bank, but they do not directly address credit risk.

Banks Reduce Credit Risk By