If on the other hand, the credit manager denies the loan request, the bank could:
Lose a potential customer and lose the financial resources derived from his payment of interest rate
Protect itself from the risk of not recovering its loan.
The situation encountered at Providian is a good example that unsafe actions which imply an increased amount of risk can be highly profitable, but can also turn into real disasters. The financial institution has set the trend for loaning money to rather dubious clients and by doing this has managed to become one of the largest financial institutions. However, their success was only valid on the short-term...
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