Although a loan sale strategy for an FI may reduce or eliminate credit risk, the strategy does not affect the FI's liquidity risk.

Question

Quizplus · Accepted Answer

A loan sale strategy can potentially affect an FI's liquidity risk as it may reduce the availability of credit and cash flow, especially if the loans being sold were generating income for the FI. The sale may also impact the FI's ability to meet its funding requirements and obligations. Therefore, it is essential for FIs to consider the potential implications on liquidity risk when implementing a loan sale strategy.

Although a Loan Sale Strategy for an FI May Reduce