The buyer of a participation loan must watch both the borrower and the seller bank closely.

Question

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As a participation loan involves both a borrower and a seller bank, the buyer of such a loan must monitor both parties to ensure that the loan is being serviced as per the terms and conditions of the contract. This includes monitoring the financial health and creditworthiness of the borrower and the performance of the seller bank in managing the loan. Failure to do so can result in potential losses for the buyer.

The Buyer of a Participation Loan Must Watch Both the Borrower