Final answer:
Commercial banks focus on short-term loans due to quicker cash flow turnover, better risk management, and the requirement of less capital compared to long-term loans.
Step-by-step explanation:
Commercial banks tend to focus on relatively short-term loans for several reasons. Short-term loans allow for a rapid turnover of cash flows, meaning the bank can get its money back and re-lend it more quickly. This practice also helps in managing risks associated with changes in economic conditions and interest rates since it's easier to adjust the portfolio of loans with short-term maturities than long-term loans. Furthermore, shorter loan periods can reduce the risk of default and asset-liability mismatches, which can occur when long-term loan repayments are locked in at lower interest rates while the current market rates are higher. Lastly, it requires less capital for a bank to make a short-term loan than a long-term one, because the bank might plan on holding the loan for a brief period before packaging it into a financial security and selling it.