Structural effects of asset-backed securitization
This paper analyses the potential changes in the operational structure of deposit-taking financial institutions that securitize assets. Findings indicate that banks can create an asset securitization pipeline structure that enables them to increase their return on capital. In other words, through securitization banks can expand their loan provision business without increasing their liabilities or their capital levels. Using a contingent claims model, four factors that impact on the bank's decision to securitize are highlighted and analysed: (i) the level of deposit insurance; (ii) capital adequacy requirements; (iii) insolvency risk; and, (iv) the risk of credit enhancements. Furthermore, we identify key accounting and regulatory challenges that emerge for banks from the process of asset backed securitization.
Year of publication: |
2000
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Authors: | Wolfe, Simon |
Published in: |
The European Journal of Finance. - Taylor & Francis Journals, ISSN 1351-847X. - Vol. 6.2000, 4, p. 353-369
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Publisher: |
Taylor & Francis Journals |
Keywords: | Asset-BACKED Securitization Return On Capital Deposit Insurance Capital Adequacy |
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