An Adverse material changes in conditions clause is included in loan commitments to protect the FI against:
A) funding risk.
B) interest rate risk.
C) takedown risk.
D) credit risk.

Question

Quizplus · Accepted Answer

An adverse material changes in conditions clause is included in loan commitments to protect the financial institution against credit risk. This clause allows the FI to refuse to fund a loan if there has been a significant deterioration in the borrower's financial condition, making it more likely that they will default on their loan.

An Adverse Material Changes in Conditions Clause Is Included in Loan