Refine
Has Fulltext
- yes (1)
Year of publication
- 2020 (1)
Document Type
- Master's Thesis (1)
Language
- English (1)
Is part of the Bibliography
- yes (1)
Institute
This research analyses whether the amended European Union (EU) Securitisation Regulation that aims to revitalise the securitisation markets is effectively reducing concerns of financial stability. Securitisation activities are a substantial part of the universe of non-bank financial intermediation, elsewhere referred to as the ‘shadow’ banking universe. Securitisations were a channel of contagion during the global financial crisis (GFC). When highly rated assets that had been packaged in mortgage-backed securities began to default, investors tried to quickly dispose of these instruments. The distrust did not discriminate, instead spreading to other securitisation instruments. The consequence was that the market for securitisation froze. This was problematic, as asset-backed securities (ABSs) are used as collateral in interbank lending. Since the GFC, securitisation markets have only recovered slowly. ABS products should stimulate access to market-based finance for the non-financial sector, primarily for small- and medium-seized enterprises, as an alternative to bank-centred finance. This assessment of whether problems of financial stability of securitisations can be ruled out takes a twofold approach. First, it is found that the regulation takes a market
rational approach and attempts to rule out false incentives and moral hazard problems with’skin-in-the-game’ rules, due diligence requirements and stringent supervision. Nevertheless, the second approach of the assessment looks beyond market failure and finds that there are problems which cannot be ruled out. Securitisation comes with bank-like risks, such as maturity and liquidity transformation, potentially divergent expectations between debtors and lenders, asset price bubbles and excessive leverage, which continue to be a potential
source of systemic risk.