All else equal, advantages of a DI operating as an asset broker in regard to mortgages includes all of the following EXCEPT

Question

BlackTom AI · Accepted Answer

To tackle this question, we must evaluate which items represent advantages of a DI (depository institution) operating as an asset broker in mortgage activities, and identify the one that does not.
A. Decreased asset and liability duration mismatch. This would be an advantage because aligning the timing of asset cash flows with liability funding reduces interest rate and liquidity risk, improving balance sheet stability.
B. Lower regulatory taxes. If true, this would also be an advantage, as a more favorable tax position lowers the cost of operations and can improve after-tax earnings.
C. Increased liquidity. Greater liquidity is typically beneficial for a DI, enabling easier funding of mortgage-related activities and better resilience during funding stress.
D. Increased fee-based income. Higher fee income from brokering mortgages is an advantage, since it enhances revenue without proportional risk-weighted asset growth.
E. Increased capital requirements. This is a disadvantage, not an advantage. Requiring more capital raises minimum regulatory capital thresholds, tying up earnings and reducing return on equity, and it does not directly improve mortgage asset brokerage operations. The overall effect is more of a constraint than a benefit.

All else equal, advantages of a DI operating as an asset broker in regard to mortgages includes all of the following EXCEPTSingle choice

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