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The Rise of the Originate-to-Distribute Model and the Role of Banks in Financial Intermediation
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The Rise of the Originate-to-Distribute Model and the Role of Banks in Financial Intermediation

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Abstract

In yesterday’s post, Nicola Cetorelli argued that while financial intermediation has changed dramatically over the last two decades, banks have adapted and remained key players in the process of channeling funds between lenders and borrowers. In today’s post, we focus on an important change in the way banks provide credit to corporations—the substitution of the so-called originate-to-distribute model for the originate-to-hold model. Historically, banks originated loans and kept them on their balance sheets until maturity. Over time, however, banks began increasingly to distribute the loans they originated. With this change, banks limited the growth of their balance sheets but maintained a key role in the origination of corporate loans, and in the process contributed to the growth of nonbank financial intermediaries.

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  • João A. C. Santos, 2012. "The Rise of the Originate-to-Distribute Model and the Role of Banks in Financial Intermediation," Liberty Street Economics 20120717, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:86816
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    1. Evan Gatev & Til Schuermann & Philip E. Strahan, 2009. "Managing Bank Liquidity Risk: How Deposit-Loan Synergies Vary with Market Conditions," The Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 995-1020, March.
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    More about this item

    Keywords

    banks; loans; credit; corporations; model;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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