Because borrowers,once they have a loan,are more likely to invest in high-risk investment projects,banks face the

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The situation described suggests a moral hazard problem, where the borrower is incentivized to take on high-risk investments since they do not bear the full cost of any losses. This leads to increased credit risk for the bank, as they may not be able to recoup their loan in the case of the borrower's investments failing.

Because Borrowers,once They Have a Loan,are More Likely to Invest