The borrowing customer has to disclose to his banker the object of the borrowing. The bank must consider carefully whether the credit is most suited to the borrower’s need. The bank will then assess whether the loan is to be used in any illegal activity or for speculative purposes. Most banks tend to decline loan proposals which are highly speculative, because the banker expects that the loan would generate sufficient profit and cash-flow.
　　In order to make the loan application successful, a customer is normally required to submit detailed financial statements that will substantiate his capability to generate adequate funds to repay the loan. The statements submitted by the customer are income statement, balance sheet and projected growth of the business. The banker will then review and analyze the real financial position of the borrower so far as repayment capability is concerned.
　　The amount of the loan the customer requests depends on his business capacity. In order to determine the precise amount to be borrowed, the banker may examine the customer’s financial statements of assets and liabilities. These statements, in principle, should provide the banker with some indications of the customer’s financial position. The bank will examine this information in determining the maximum to be made available to the customer. In practice, a bank should never lend a customer more than a quarter of his own resources or financial assets.
　　The term of the loan is an essential factor in assessing credit risk. The longer the term of the loan, the higher the risk exposure due to the chance of unfavorable long-term economic and political changes. In this respect the bank may tailor a loan repayment schedule in accordance with the customer’s financial
　　planning and any possible risk.
　　If a bank decides to provide long-term loans to customers in the international market, it should conduct a thorough and explicit “country-risk” assessment in order to produce some quantitative yardstick. The country-risk assessment should provide useful information about a country’s risk grading as far as lending is concerned.
　　71. The bank will refuse the loan request when the loan is found to be used _________.
　　A. in any illegal activity
　　B. as working capital
　　C. for speculative purposes
　　D. both A and C
　　72. If the loan proposal is not likely _________ to meet the repayment schedule, the loan is unlikely to be approved.
　　A. to generate sufficient profit
　　B. to create more chances of employment
　　C. to produce enough finished goods
　　D. to help the business repay debts
　　73. which of the following is the necessary item considered by the banker when the amount Of the loan is decided?
　　A. The borrower’s application.
　　B. The borrower’s business capacity.
　　C. The borrower’s financial statements.
　　D. The borrower’s legal activity.
　　74. The country-risk assessment of lending should provide useful information about
　　A. a country’s economic environment.
　　B. the potential political risk.
　　C. a country’s risk grading.
　　D. identification of the customer in that country.
　　75. How much money should a bank lend to a customer according to the lending principles?
　　A. Never more than a half of his own resources or financial assets.
　　B. Never more than one third of his own resources or financial assets.
　　C. Never more than a quarter of his own resources or financial assets.
　　D. Never more than one and a half of his own resources or financial assets.

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