One reason a bank's officer may be reluctant to write off a past-due loan is that it will:
A) increase the bank's liabilities.
B) decrease the bank's assets and capital.
C) increase the bank's liabilities and assets, requiring more capital to be held.
D) make the bank's accounts less transparent.

Question

Quizplus · Accepted Answer

Writing off a past-due loan will decrease the bank's assets (since they are losing money that they expected to receive), and therefore decrease their capital. This is why the officer may be reluctant to write off the loan.

One Reason a Bank's Officer May Be Reluctant to Write