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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Rethinking the regulatory treatment of securitization |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Journal of Financial Stability |
| Publisher | Elsevier Inc. |
| Geographical Reach | international |
| ISSN | 1572-3089 |
| Volume | 10 |
| Page Range | 20 - 31 |
| Date | 2014 |
| Abstract Text | In a model where banks play an active role in monitoring borrowers, we analyze the impact of securitization on bankers’ incentives across different macroeconomic scenarios. We show that securitization can be part of the optimal financing scheme for banks, provided banks retain an equity tranche in the sold loans to maintain proper incentives. In economic downturns however securitization should be restricted. The implementation of the optimal solvency scheme is achieved by setting appropriate capital charges through a form of capital insurance, protecting the value of bank capital in downturns, while providing additional liquidity in upturns. |
| Free access at | DOI |
| Official URL | http://www.sciencedirect.com/science/article/pii/S1572308912000629 |
| Digital Object Identifier | 10.1016/j.jfs.2012.10.002 |
| Other Identification Number | merlin-id:7952 |
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