What is a step a bank can take to protect itself from loan defaults which can lead to recessions?

1 answer:

5 0

Diversifying its loans is a step a bank can take to protect itself from loan defaults which can lead to recessions.

By opting to diversify their loan portfolios or to maintain a larger percentage of their assets in bonds and reserves, banks can safeguard themselves against these risks. The full sum of the new deposits can be lent out by the bank. - Only the amount of the bank's excess reserves may be lent. - Only 25% of the deposits deposited by clients are lent by banks. In banking, asset/liability management is also employed. A bank is required to charge interest on loans as well as pay interest on deposits. Bankers monitor the net interest margin, or the difference between interest received on loans and interest paid on deposits, to control these two factors.

Learn more about loans here brainly.com/question/9302251

#SPJ4.

You might be interested in

Under the liquidated damages clause in the Contract To Buy and Sell Real Estate, if the buyer defaults the seller has what optio

Yanka [14]

Answer:

points

Explanation:

4 0

3 years ago

If the absence of an agreement to the contrary in partnership, what are the all partners entitled?

Ne4ueva [31]

Answer:

d) All of above

Explanation:

A partnership agreement provides guidelines on how two or more partners will manage their partnership business. It is the contract that dictates each partner's roles, profit and loss sharing formula, and personal liability of each in case of insolvency.

In the absence of a partnership agreement, the law prescribes that partners share profits and losses equally. All partners assume equal rights to responsibilities and liabilities.

6 0

2 years ago

At the end of the year, Sheffield Co. has pretax financial income of $616,000. Included in the $616,000 is $78,400 interest inco

SVEN [57.7K]

Answer:

$173,820

Explanation:

pretax financial income $616,000

- interest income on municipal bonds ($78,400)

+ depreciation ($67,200 - $50,400) = $16,800

+ fine for dumping hazardous materials $25,000

taxable income = $579,400

income taxes payable = $579,400 x 30% = $173,820

Fines are not tax deductible, and since depreciation for tax purposes is lower than accounting depreciation, you must add them. But since municipal bonds are not taxable, they must be subtracted.

3 0

2 years ago

What does it mean to trust intent to avoid conflict

Gekata [30.6K]

Answer:

If you don't trust the other party, you can't resolve conflict with them. You may even come to an agreement but without trust, you won't stick to it. ... In negotiations, parties who trust each other are more likely to cooperate and reveal information that may risk vulnerability.

3 0

2 years ago

In a free competitive market what is the rationing mechanism

enot [183]

A competitive market has many producers competing with one another to satisfy the wants and needs of many consumers. In a free competitive market, the prices of goods and services are set by the consumers and supply and demand aren't regulated by the government. Knowing this, in a free competitive market the rationing mechanism is based on price.

6 0

2 years ago