Banks spread the risk of lending money across many borrowers by:

Question

Quizplus · Accepted Answer

Banks spread the risk of lending money by diversifying their portfolio of borrowers. This means lending to a mix of low-risk and high-risk borrowers, as well as diversifying across different industries and sectors. By doing so, banks can minimize their exposure to any one particular borrower or industry, and reduce the risk of loan defaults. This is more effective than charging high-interest rates or only lending to risky borrowers. Borrowing from the government may also provide some support, but it is not a primary risk management strategy for banks.

Banks Spread the Risk of Lending Money Across Many Borrowers