Hold to Collect Business Model

From Open Risk Manual

Definition

Hold to Collect Business Model in the context of IFRS 9 denotes a Business Model whereby financial assets are held to their maturity as opposed to being held-for-trading.

Context

In many jurisdictions, including Europe, the normal practice for banks is to originate loans and then to hold them until maturity to collect interest payments and their principal (“originate and collect model”). In other jurisdictions, notable in the US, banks often originate loans and subsequently sell them to third parties, with a business model closer to “originate and distribute”. Loans originated with the intention to sell would not meet the criteria to be measured at amortised cost.