The process of securitisation such as issuing residential mortgage-backed securities (RMBS)allows financial institutions to:

Question

Quizplus · Accepted Answer

Securitisation allows financial institutions to fund lending indirectly through the capital market by pooling together loans and issuing securities backed by those loans, such as RMBS. This allows financial institutions to free up capital to make more loans and potentially increase profits. Option A is incorrect as securitisation is an indirect way of funding lending rather than directly. Option B is incorrect as securitisation does not create deposits. Option D is incorrect as there is a correct answer.

The Process of Securitisation Such as Issuing Residential Mortgage-Backed Securities