Question

A bank created by numerous banks to fund a project that is too large for one bank to do alone is known as

• A. Merchant banking
• B. Investment banking
• C. Retail banking
• D. Consortium banking

Answer 1

Answer:

D. Consortium banking

Consortium Banking:

• Consortium banking is system in which a subsidiary bank is created by numerous banks.
• A Consortium Bank is usually created to fund a specific project.
• A consortium bank is a bank created by numerous banks to fund a project that is too large for one bank to do alone.
• The purpose of creating a consortium bank is to leverage the assets of individual banks.
• All members in a consortium bank have equal ownership and no one bank has a controlling interest.
• Thus the syndicated lending system provides space and the possibility for risk sharing among banks.
• A loan syndicate is similar to a consortium.