21. What is securitization in lending?
a) Selling non-performing assets to recover funds
b) Repackaging loans into securities and selling them to investors
c) Transferring loan defaults to another financial institution
d) Reducing the interest rate on loans
22. Which of the following is a common example of lending risk mitigation?
a) Offering lower interest rates to high-risk borrowers
b) Increasing the loan term for high-risk borrowers
c) Requiring high collateral from high-risk borrowers
d) Approving loans without credit checks
23. What is the purpose of loan documentation in lending?
a) To determine the borrower’s creditworthiness
b) To calculate the loan amount
c) To ensure legal protection for both the lender and borrower
d) To assess the borrower’s income level
24. What role does stress testing play in lending risk management?
a) Assessing the bank’s capital adequacy under adverse scenarios
b) Determining the loan interest rate for borrowers
c) Evaluating the borrower’s creditworthiness
d) Selling non-performing assets to recover funds
25. What is concentration risk in lending?
a) The risk of borrowers defaulting on loans
b) The risk of having a high proportion of loans in one industry or sector
c) The risk of inaccurate credit scoring
d) The risk of lending without collateral
