When considering a request for a loan from a retail customer, which of the following factors is relevant for a bank to consider:

When considering a request for a loan from a retail customer, which of the following factors is relevant for a bank to consider:
A . The other retail loans in its portfolio
B . The credit worthiness of the retail customer
C . The contribution this new loan would bring to total portfolio risk
D . All of the above

Answer: D

Explanation:

The credit worthiness of the retail customer is certainly a factor for the bank to consider as it will need to price the loan to cover the expectation of default. At the same time, it will need to look at other loans in its portfolio as to avoid unacceptable concentration risk. A corollary of the same theme is that the bank will need to take a portfolio view of the loan request and consider its contribution to total portfolio risk. Therefore all the choices are appropriate considerations for the bank and Choice ‘d’ is the correct answer.