Loan participations are typically sold to correspondent banks because:

Question

Quizplus · Accepted Answer

Correspondent banks offer the greatest monitoring opportunities as they are in an ongoing relationship with the original lender and have a vested interest in ensuring the repayment of the loan. Insider trust and regulatory requirements may be factors, but they are not the primary reason for selling loan participations to correspondent banks. Pricing may also be a consideration, but it is not the main reason for choosing correspondent banks as buyers.

Loan Participations Are Typically Sold to Correspondent Banks Because