A possible bad implication of asset securitization to the issuer is
A)the issuer can avoid regulatory taxes and therefore violates the spirit of banking regulation.
B)the quality of the issuer's assets may deteriorate since the issuer would be more likely to securitize the most liquid assets.
C)the issuer is subject to a higher capital and reserve requirements.
D)the issuer directly competes with investment banks that may have more expertise in dealing with capital market.
E)none of the above

Question

Quizplus · Accepted Answer

When an issuer securitizes only their most liquid assets, it may leave less desirable assets on their balance sheet, potentially leading to the deterioration of the quality of their asset base. This can result in higher credit risk and lower credit ratings, which may increase borrowing costs for the issuer. The other choices are not specifically related to the potential negative effects of asset securitization on the issuer.

A Possible Bad Implication of Asset Securitization to the Issuer