An "adverse material changes in conditions" clause is included in loan commitments to protect the FI against
A)credit risk.
B)interest rate risk.
C)takedown risk.
D)funding 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 lender to withdraw from the loan commitment if it deems that the borrower's creditworthiness has significantly deteriorated or if there have been material changes in the borrower's financial condition. This protects the lender from potential losses in the event that the borrower becomes insolvent or is unable to repay the loan.

An "Adverse Material Changes in Conditions" Clause Is Included in Loan