31. What is the purpose of a credit risk committee in lending?
a) To determine the interest rate on loans
b) To identify non-performing assets
c) To assess the borrower’s creditworthiness
d) To evaluate the bank’s capital adequacy
32. Which of the following is an example of mortgage default risk?
a) The borrower loses their job
b) The borrower’s credit score improves
c) The borrower sells the property
d) The borrower pays off the mortgage early
33. What is an early warning system in lending?
a) A system that notifies borrowers about upcoming loan repayments
b) A system that alerts lenders about potential default risks
c) A system that calculates the maximum loan amount for borrowers
d) A system that mitigates interest rate risk
34. How does portfolio diversification reduce lending risks?
a) By increasing the number of loans offered by the bank
b) By concentrating loan exposure in one industry or sector
c) By spreading loan exposure across different industries or sectors
d) By reducing collateral requirements for borrowers
35. What is a loan modification in lending?
a) Selling non-performing assets to recover funds
b) Restructuring the terms and conditions of a loan to alleviate borrower financial difficulties
c) Increasing the interest rate on loans
d) Reducing the loan amount
