One response to this uncertain environment has been a large increase in the volume and variety of loan commitments — promises by banks to make future loans at the customer's demand. These agreements provide commercial borrowers with assurance that funds will be available, often at a contractually set rate. One can view the loan commitment as an insurance contract, in which borrowers purchase protection against certain risks, and banks  as insurers  take risks upon themselves.

This article appeared in the May/June 1986 edition of Business Review.

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