Final answer:
The statement is false; banks usually require collateral or other forms of security when providing loans to ensure repayment. Collateral often includes property or equipment that the bank can claim if the borrower defaults. The securitization process can sometimes lead to less stringent loan approvals and riskier lending practices.
Step-by-step explanation:
The statement that a bank will not require security in the form of collateral as a guarantee the loan will be repaid is false. In the financial capital market, banks often require some form of security to protect themselves against default on a loan. This can include the prospective borrower filling out forms regarding income sources, a thorough credit check, requiring a cosigner, and indeed, asking for collateral, which can be property or equipment that the bank has the right to seize and sell if the loan is not repaid.
Banks are inclined to scrutinize borrowers to ensure that the loan will be serviced. However, through the process called securitization, where banks sell loans and package them into financial securities, they may, in some cases, be less stringent. This sometimes leads to the issuance of riskier 'subprime loans,' which could exhibit characteristics such as low or zero down-payment, minimal income verification, fluctuating payment schedules, and was infamously known as NINJA loans during the mid-2000s financial crisis.