If a future credit crunch occurs, a loan commitment may expose the FI to:
A)credit risk
B)interest rate risk
C)sovereign country risk
D)funding risk

Question

Quizplus · Accepted Answer

Funding risk is the risk that a financial institution will not be able to meet its obligations to its depositors and other creditors. A loan commitment is a contract to lend money in the future. If a future credit crunch occurs, the FI may not be able to fund the loan commitment, which could lead to a loss.

If a Future Credit Crunch Occurs, a Loan Commitment May