Abstract
Because a sub-prime loan was extended to someone with a poor credit record, it was highly profitable to the lender, who demanded and received higher interest rates for the additional risk. Although a traditional bank had to carefully assess the creditworthiness of its borrowers in order to maintain sound asset quality because it provided loans from its deposit base, a sub-prime lender did not take customer deposits but funded itself from the money market. These lenders did not hold on to their loans but sold them off to investors.
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Notes
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© 2015 Jes Villa
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Villa, J. (2015). Impact of Securitization. In: Ethics in Banking. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, London. https://doi.org/10.1057/9781137340283_7
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DOI: https://doi.org/10.1057/9781137340283_7
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