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 that borrowers can default on their loans or debts, leading to losses for the financial institution. If the default rate is high, it can lead to a potential failure for the FI. While interest rate and foreign-exchange risk can cause losses, they are not as likely to lead to the failure of an FI as credit risk.

Credit Risk Is More Likely to Lead to Failure of an FI