These problems have been further compounded by uncertainties relating to valuation practices. What should we take away from this? That banks – and supervisors – must redouble their efforts to ensure that sound underwriting standards are in place and that there are adequate, systematic procedures for identifying firm-wide risk concentrations.
Originate-to-distribute business model What other factors – aside from complacency – have hindered adoption of such basic principles? Perhaps one of the stumbling blocks has been the expanded use of the originate-to-distribute model. Managing this model’s associated risks poses significant challenges and, in some cases, has led to large risk exposures and concentrations that firms’ senior management failed to detect.