The likelihood of financial loss caused by a borrower failing to repay the principal and interest on a loan is called:

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	Risk
B	Loss
C	Character

Explanation:

Detailed explanation-1: -Credit risk is the possibility of a loss resulting from a borrower’s failure to repay a loan or meet contractual obligations. Traditionally, it refers to the risk that a lender may not receive the owed principal and interest, which results in an interruption of cash flows and increased costs for collection.

Detailed explanation-2: -Credit risk is defined as the potential loss arising from a bank borrower or counterparty failing to meet its obligations in accordance with the agreed terms.

Detailed explanation-3: -This is included in the category of financial risk. There are at least 4 risks included in it, namely income risk, expenditure risk, asset or investment risk, and credit risk.

Detailed explanation-4: -Financial risk refers to the likelihood of losing money on a business or investment decision. Risks associated with finances can result in capital losses for individuals and businesses. There are several financial risks, such as credit, liquidity, and operational risks.

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