Banks and FIs Rely on Which of the Following Contractual

Multiple Choice

Banks and FIs rely on which of the following contractual mechanisms to control the credit risks of lending?

A) requiring higher interest rate spreads and fees on loans to more risky borrowers.
B) restricting or rationing loans to more risky borrowers
C) requiring enhanced seniority for the bank over assets of risky borrowers
D) diversifying across different types of risky borrowers
E) all of the above are utilized.