Besides reducing credit risks, an FI has an incentive to sell loans it originates for all of the following reasons except to:
A)geographically diversify
B)decrease core deposits
C)lower reserve requirements
D)lower capital requirements

Question

Quizplus · Accepted Answer

Selling loans allows financial institutions (FIs) to geographically diversify their loan portfolios, lower their reserve requirements by reducing the total amount of deposits they must hold in reserve, and lower capital requirements by transferring the risk associated with the loans. Decreasing core deposits is not a reason for selling loans; in fact, FIs typically aim to increase or maintain their core deposits as a stable source of funding.

Besides Reducing Credit Risks, an FI Has an Incentive to Sell