Which of the Following Is NOT a Contractual Mechanism Used

Multiple Choice

Which of the following is NOT a contractual mechanism used by FIs to control credit risks?

A) Diversifying across different types of risky borrowers.
B) Requiring higher interest rate spreads for higher risk borrowers.
C) Requiring more collateral for the bank over the assets of more risky borrowers.
D) Making lending decisions only in centralized locations.
E) Placing more restrictive covenants on the actions of more risky borrowers.