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can a gain on sale of a loan be considered gain on a non trading derivative?...

can a gain on sale of a loan be considered gain on a non trading derivative?

Is a loan sale considered non trading derivative?

is gain on loan sale considered a other than equity security?

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Answer #1

Yes, Gain on sale of a loan is not considered as a gain on a non trading derivative.

A derivative is one which fulfills all the following condition:

1) Has no/nil investment.

2) Derives it's value from Underlying.

3) Settlement will take place in future.

Since loan doesn't satisfy all the condition mentioned above, thus it is not a derivative and so it can be treated a non trading derivative.

Yes Gain in Loan Sale is considered as other than equity security because equity is owners/shareholders fund and loan is a debt instrument. Thus, gain on sale of loan is debt security.

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