A loan commitment is an agreement whereby a lender (bank) agrees to lend to a customer for a pre terms while retaining the right to return to its promise, as the creditworthiness of the borrower deteriorates. The agreement also stipulates the fees to be paid during the duration of the commitment. Loans are widely used in the economy. As its use has spread, a rich literature has developed to explain why they exist, how they are valued and how they affect the risks of banking and deposit insurance. This article more.....
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