More FIs fail as a result of credit risk exposures than either interest rate or FX risk exposure.

Question

Quizplus · Accepted Answer

This is generally true. Credit risk is the risk of loss that arises from the failure of a borrower to repay a loan or meet contractual obligations. As a result, credit risk is a major concern for financial institutions (FIs) that lend money or invest in debt securities. Interest rate and foreign exchange (FX) risks are important risks as well, but credit risk is typically the most significant driver of financial distress and failure for FIs.

More FIs Fail as a Result of Credit Risk Exposures