In contrast, banks hold a more diversified mix of liabilities and assets, many of which are less sensitive to unexpected changes in interest rates, suggesting that banks as a general matter are less prone to interest rate risk.
Regardless, little social benefit is gained by encouraging the concentration of the substantial interest rate risks associated with long-term mortgages into only two government-sponsored organizations, when such risk could be easily distributed across tens of thousands of entities, both domestic and foreign, through the process of mortgage securitization. 4  BIS Review 22/2007  creditors of a failed GSE will bear financial losses.