Which of the following is true of an 'adverse material change in conditions clause' used in a loan commitment?
A)It allows the FI to cancel or reprice a loan commitment.
B)It protects the lender against takedown risk.
C)It protects the lender against basis risk.
D)Exercise of the clause helps defaulted borrowers.

Question

Quizplus · Accepted Answer

An adverse material change in conditions clause in a loan commitment allows the financial institution to cancel or reprice the loan commitment if there is a significant change in the borrower's financial condition or in the general economic environment. This protects the lender from potential losses due to changes in the borrower's ability to repay or other economic factors that could impact the loan's profitability.

Which of the Following Is True of an 'Adverse Material