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The collection of loans held as assets by a financial institution. Such institutions hold loan portfolios for two reasons: first, their total assets are often too large for it to be practicable to lend to only one borrower; and second, a number of loans are safer than a single large one, especially if the borrowers have a degree of spread, either geographically or by industry. This makes it safe to expect that even if some borrowers default, the profits on the ones who do not will make the portfolio profitable as a whole.
Subjects:Social sciences — Economics
Reference entries
loan portfolio
in A Dictionary of Economics(3)Length: 95 words
