What happens to the financial intermediary that lends money that is not repaid?

When a financial intermediary, such as a bank, lends money that is not repaid, it incurs a loss that can impact its profitability and capital reserves. If the default rate is significant, it may lead to liquidity issues, forcing the intermediary to tighten lending standards or raise interest rates. In severe cases, sustained losses can jeopardize the institution's solvency, potentially resulting in bankruptcy or requiring a government bailout. Overall, non-repayment affects not only the intermediary but can also have broader implications for the financial system and economy.