The originate-to-distribute (OTD) model refers to the loan originator selling loans to various third parties after the loan-origination process. This can diversity banks’ funding sources, thereby reducing concentration of risk.

At the International Trade and Forfaiting Association’s (ITFA) 50th annual conference, Deepesh Patel, Editorial Director at Trade Finance Global, spoke to Marcus Miller, Managing Director, Global Lenders Solutions Group Leader, Credit Specialties at Marsh, about the OTD model and responsiveness to regulation.

“We’re pleased as an industry to be able to respond positively to the move to what we see as a harder originate to distribute or originate to share model,” he explained, “The move away by pretty much all tier-one or -two financial institutions from a buy-to-hold model whereby they were taking the yield on assets.”

For Miller, changes have been the consequence of ever-evolving regulation. They have elucidated the need for a dynamic portfolio, for two key reasons. 

“For one, to maintain or create profitability through the portfolio through risk distribution.

“And for another, it’s well understood that having a diverse portfolio through distribution increases resilience to financial shocks going forward.” The OTD mentality plays very well for willing investors here.

“And that’s where credit insurers have been very responsive in terms of providing eligibility criteria, committed capacity, and almost instant solutions to be competitive […] but also to sit next to that originate to distribute model.”

To find out more, watch the full interview.