Financial intermediaries can engage in credit risk transformation because they:
A) obtain cost advantages owing to their size and business volumes transacted.
B) can quickly convert financial assets into cash, close to the current market price.
C) develop expertise in lending and diversifying loans.
D) can pool savers' short-term deposits and make long-term loans.

Question

Quizplus · Accepted Answer

Financial intermediaries develop expertise in assessing and managing credit risk, and they diversify their loan portfolios to mitigate the impact of any single borrower's default.

Financial Intermediaries Can Engage in Credit Risk Transformation Because They