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From the point of view of the borrowing business, loan capital tends to be cheap but risky. In what sense is it risky?
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- Is it financial expediency for firms to borrow?We think of banks as being interest rate intermediaries. That is, the borrow cheaply, and then lend at higher rates, and the spread between those is their profit. But, besides interest rates, what other sorts of risks do banks face?What is the link between securitization and the economic function of financial intermediaries? What happens to financial intermediaries when the process of securitization advances?
- What is the connection between securitization and the economic function of financial intermediaries? What happens to financial intermediaries when the process of securitization moves forward?What are some moral hazard issues with structured finance?Financial Institutions have Off-Balance-Sheet acitivities mainly (Commitment Loans; Letter of Credits; Loans slold, and Derivative contracts). What are the potential advantages and risks exposed of these activities?