Beware 'buy-and-hold' banking model limitations

Binning the 'originate-to-distribute' banking model in favour of the 'buy-and-hold' model would reduce the role of securitisation – a risk-sharing mechanism that, when done properly, can bring benefits to issuers and buyers alike

Christopher Jeffery

Policy-makers and supervisors in many countries in the Asia-Pacific appear determined to ensure the business model adopted by banks in the region predominantly leans towards the ‘buy-and-hold’ approach rather than the ‘originate-to-distribute’ model favoured by many western banks prior to the financial crisis. The traditional ‘buy-and-hold’ model involves banks extending credit up to their regulatory or economic limits and then holding the loans to maturity before they take on more debt.


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