In the traditional 'originate-to-hold' banking model, where a DI takes short-term deposits and uses them to make loans, the bank usually holds these loans until maturity. This exposes the bank to increased:

Question

Quizplus · Accepted Answer

The bank is exposed to increased interest rate and liquidity risk because it holds the loans until maturity. This means that if interest rates rise, the bank will have to pay more interest on its deposits than it is earning on its loans. Additionally, if there is a sudden demand for withdrawals, the bank may not have enough liquid assets to meet the demand.

In the Traditional 'Originate-To-Hold' Banking Model, Where a DI Takes