Discuss why loan originators might consider selling a loan. Why might an institution consider buying loan participation? Why do large institutions participate in loan syndications? What are the advantages and disadvantages of serving as the lead bank?
Answer to relevant QuestionsExplain why collateral alone does not justify extending credit. Cite examples, using real estate or agricultural products as collateral. Generally, a high current ratio is an indicator of good liquidity. Under what circum-stances or conditions could a high current ratio be an indicator of problems with the company’s current assets? What is the goal of the CRA? How do regulators enforce its provisions? Describe how a bank should apply an objective credit scoring model when evaluating consumer loan requests. Given the information in Exhibits 15.10 and 15.11 and in the text, indicate why you would or would not approve ...Large banks often borrow heavily in the federal funds market and maintain small investment portfolios relative to their asset size. Are these offsetting risk positions? Why do large banks organize themselves this way?
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