24-26 Credit risk is more likely to lead to failure of an FI than either interest rate or foreign-exchange risk.

Question

Quizplus · Accepted Answer

Credit risk refers to the risk of borrowers defaulting on their loans or obligations, which can lead to losses for the financial institution. Unlike interest rate risk and foreign exchange risk, credit risk has the potential to lead to outright failure of the FI if the losses are significant enough. Therefore, credit risk is more likely to lead to failure of an FI compared to interest rate or foreign exchange risk.

24-26 Credit Risk Is More Likely to Lead to Failure