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      Question

      The level of risk that arises from exposure to a single

      counterparty or sector, and it has the potential to produce large amounts of losses is called:
      A Default Risk Correct Answer Incorrect Answer
      B Concentration Risk Correct Answer Incorrect Answer
      C Reputation risk Correct Answer Incorrect Answer
      D Systemic Risk Correct Answer Incorrect Answer
      E None of the above Correct Answer Incorrect Answer

      Solution

      Concentration risk is the level of risk that arises from exposure to a single counterparty or sector, and it offers the potential to produce large amounts of losses that may threaten the lender’s core operations. For example: If a lender takes a large amount of exposure to one borrower who is having one type of business, then there is a concentration risk for the lender.

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