Question

Securitization is beneficial for banks because it _____________.

Answer 1

Securitization is beneficial for banks because it allows them to avoid exposure to local financial risks and provides liquidity through the ability to quickly pool and sell loans.

Step-by-step explanation:

Securitization is beneficial for banks because it allows them to avoid exposure to local financial risks. When a bank sells its local loans and buys mortgage-backed securities based on loans from different parts of the country, it diversifies its portfolio and reduces vulnerability to a decline in the local economy. Additionally, securitization helps banks by allowing them to quickly pool and sell loans to investors, which in turn provides banks with liquidity.