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    Question

    Banks will not be able to mitigate risks in their credit

    portfolio, if they
    A secure loans by mortgages Correct Answer Incorrect Answer
    B secure loans by third party guarantees Correct Answer Incorrect Answer
    C diversify their portfolio across all regions Correct Answer Incorrect Answer
    D Take exposures in few select industries Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Credit risk is associated with the risk of default. Taking exposure in few select industries poses the bank to the concentration risk, thereby increasing the credit risk for the bank.

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