GARP Exam 2016-FRR Topic 3 Question 4 Discussion

Which of the following statements explains how securitization makes retail assets highly liquid and the balance sheet easier to manage?

I . The bank can raise capital by selling the securitized bonds.

II . Any need to diversify credit risk can be achieved by selling the bank's own securitized bonds and buying other bonds that increase diversification.

III . The value of the securitization is linked to the credit rating of the bank and hence is easy to include in medium-term financial plans.

IV . Securitizations can be used to hedge credit risk by using limited market instruments.