sector of the economy or country. Separate concentration ratios must be calculated for each type of concentration.

To illustrate, a portfolio with 10 equally sized loans would have a concentration ratio of 0.1 or 10%, whereas a portfolio of 10 loans - 9 equally sized and 1 equal to half the value of the portfolio would have a concentration ratio of 0.27 or 27%.

The ratio is useful for bankers or investors at large to identify when a portfolio may be excessively exposed to the risk that a recession

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