When a depository institution pools risk, it
A) buys short and lends long.
B) borrows reserves from the Federal Reserve.
C) spreads loan losses across many depositors so that no one depositor faces a high degree of risk.
D) makes loans to just one firm.

Question

Quizplus · Accepted Answer

Pooling risk involves spreading out potential loan losses across many depositors or investments, reducing the impact of any single loss on the institution and its depositors. This is a risk management technique.

When a Depository Institution Pools Risk, It