When a DI Makes a Shift from an "Originate-To-Hold" Banking

question 31

Multiple Choice

When a DI makes a shift from an "originate-to-hold" banking model to an "originate-to-distribute" model, the change is likely to result in

• A)increased operating costs.
• B)increased interest rate risk.
• C)increased liquidity risk.
• D)decreased monitoring costs.
• E)decreased fee income.

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Definitions:

Agent

A party primarily engaged to act on behalf of and for the benefit of another party or parties (the principal(s)) which therefore does not control the investee when it exercises its decision-making authority.

Variable Returns

Returns from an investment that fluctuate over time due to market conditions or other factors.

Economies of Scale

Cost advantages that entities experience as their operational size or volume increases, leading to reduced costs per unit of output.

Remuneration

The compensation a person receives in return for performing work or services, including wages, salaries, and benefits.