Credit Risk Assessment Framework

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What is the primary expectation of a borrower's character from the bank's perspective?

To possess traditional values of integrity and responsibility (correct)

To possess a high credit score

To possess traditional values of profit maximization

To have a strong social media presence

Which of the following is NOT considered a positive attribute of a borrower's character?

Being genuine

Lacking responsibility (correct)

Being discreet

Being prudent

When assessing the character of a company, what is the key determinant?

The character and moral strength of its senior management (correct)

The company's market value

The company's industry reputation

The company's financial statements

What is the main reason why the bank specifies the criteria for 'good character'?

To minimize the risk of lending to borrowers with poor character Signup and view all the answers

Which of the following is an example of a borrower's poor behavior?

A history of loan defaults Signup and view all the answers

What is the primary focus of character assessment in consumer lending?

The borrower's integrity, sense of responsibility and behavior Signup and view all the answers

What does the aspect of “Character” in the 5Cs of Credit Risk Assessment address?

Attributes such as integrity, management style, and willingness to repay Signup and view all the answers

Which of the following is an attribute related to the “Character” aspect of credit risk assessment?

Willingness to repay Signup and view all the answers

What does a borrower’s management lifestyle, such as being thrifty or extravagant, relate to in credit risk assessment?

Character aspect of the 5Cs Signup and view all the answers

Why is marital status a relevant factor in credit risk assessment?

It reduces the tendency to default due to family commitment Signup and view all the answers

What does the aspect of “Character” in credit risk assessment examine?

A borrower's attributes, such as integrity and management style Signup and view all the answers

Which age group of borrowers is considered more stable and less likely to default?

Middle-aged and elderly borrowers Signup and view all the answers

What is the primary objective of the credit officer when assessing potential borrowers?

To identify borrowers who possess positive behavioural attributes Signup and view all the answers

What is represented by the boxes A, B, C, and D in Figure 5.1?

Types of borrowers based on their loan repayment habits Signup and view all the answers

What is the purpose of the 5Cs Framework in credit risk assessment?

To remind credit officers of some of the key characteristics to look for in a potential borrower Signup and view all the answers

What are the five elements of the 5Cs Framework?

Character, Condition, Capacity, Capital, and Collateral Signup and view all the answers

What is the relationship between the 5Cs Framework and the decision to approve a loan?

The 5Cs Framework is necessary but not sufficient for deciding on a loan Signup and view all the answers

What aspect of a potential borrower does the Character element of the 5Cs Framework assess?

Their positive behavioural attributes Signup and view all the answers