5. The Head of Business of your bank argues that after continuous decline over the last two years, the real estate sector has now stabilized, if not bottomed out. He has submitted a business case, proposing a strategy to significantly increase real estate exposure in the credit portfolio, over the next six months to one year. As Head of Credit Risk of the bank, what macroeconomic factors would you consider while studying this proposal?6. One of your friends states that the banks contribute towards business cycles (an external risk). While the banks over-lend during boom times resulting in over-leveraged (debt burdened) business firms, they cut credit lines to business during an economic downturn, choking trade flows. Do you agree with this statement? Please explain with reasons.

7. Read any business daily (for a period of at least one month) and record the major external risks discussed in the newspaper. If you are managing a credit portfolio, you may link such external risk to the borrowers in your credit portfolio.

8. From 2010 onwards, Greece has faced a debt crisis, impacting its economic growth. Examine the government debt/GDP ratio during this period (and the immediately preceding years) and analyze whether this ratio could have acted as an Early Warning Indicator.