The Jennings Bank of Texas,wants to protect itself from credit risk by making large loans to corporate customers,by making residential mortgages to families,by making agriculture loans to farmers and ranchers in the area,by making small business loans to business along main street and by making automobile loans for the car dealership across the street from the bank.What defense against risk is this bank making?

Question

Quizplus · Accepted Answer

The Jennings Bank of Texas is using portfolio diversification as a defense against credit risk by making loans to a variety of customers in different sectors such as corporate, residential, agriculture, small business, and automobile. By diversifying its portfolio, the bank can spread its risk across different types of loans and reduce its overall exposure to credit risk. This strategy can help to minimize the potential losses from loan defaults and ensure the long-term sustainability of the bank.

The Jennings Bank of Texas,wants to Protect Itself from Credit