A depository institution's _________________ normally determines its legal lending limit to a single borrower.
A)volume of capital
B)number of customers
C)number of employees
D)number of offices
E)profitability

Question

Quizplus · Accepted Answer

A depository institution's volume of capital (or equity) is a key factor in determining its legal lending limit to a single borrower. Regulations limit the amount that a depository institution can lend to any one borrower in order to minimize the risk of a large loan default impacting the institution's financial stability. The legal lending limit is calculated based on a percentage of the institution's capital, and therefore the volume of capital held by the institution determines the limit.

A Depository Institution's _________________ Normally Determines Its Legal Lending Limit