Securitization raises the level of competition for the best-quality loans among banks.

Question

Quizplus · Accepted Answer

Securitization allows banks to pool loans and sell them to investors, thereby freeing up capital to make new loans. This increased liquidity and lower risk for the banks can lead to greater competition for the best-quality loans, as they can sell them off and use the proceeds to make more loans or invest in other profitable ventures.

Securitization Raises the Level of Competition for the Best-Quality Loans