An "material adverse change in conditions" clause is included in loan commitments to protect the FI against

Question

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A material adverse change in conditions clause is typically included in loan commitments to protect the financial institution (FI) against credit risk. It allows the lender to withdraw or cancel a loan commitment if significant changes in the borrower's financial condition occur. This protects the FI from the risk of lending to a borrower who may no longer be able to repay the loan. Option B (interest rate risk) is not relevant to this clause, as it deals with changes in a borrower's financial condition. Options C, D, and E are also not relevant, as they do not relate to the borrower's creditworthiness.

An "Material Adverse Change in Conditions" Clause Is Included in Loan