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Financial intermediation and the post-crisis financial system

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  • Hyun Song Shin
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    Abstract

    Securitization was meant to disperse credit risk to those who were better able to bear it. In practice, securitization appears to have concentrated the risks in the financial intermediary sector itself. This paper outlines an accounting framework for the financial system for assessing the impact of securitization on financial stability. If securitization leads to the lengthening of intermediation chains, then risks becomes concentrated in the intermediary sector with damaging consequences for financial stability. Covered bonds are one form of securitization that do not fall foul of this principle. I discuss the role of countercyclial capital requirements and the Spanish-style statistical provisioning in mitigating the harmful effects of lengthening intermediation chains.

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    Bibliographic Info

    Paper provided by Bank for International Settlements in its series BIS Working Papers with number 304.

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    Length: 38 pages
    Date of creation: Mar 2010
    Date of revision:
    Handle: RePEc:bis:biswps:304

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    Related research

    Keywords: leverage; financial intermediation chains; financial stability;

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    Cited by:
    1. João Sousa & Ricardo M. Sousa, 2011. "Asset Returns Under Model Uncertainty: Evidence from the euro area, the U.K. and the U.S," Working Papers w201119, Banco de Portugal, Economics and Research Department.
    2. Finn Poschmann, 2011. "What Governments Should Do in Mortgage Markets," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 318, January.
    3. Cabral, Ricardo, 2013. "A perspective on the symptoms and causes of the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 103-117.
    4. Jörg Bibow, 2010. "Alternative Strategien der Budgetkonsolidierung in Österreich nach der Rezession," IMK Studies 03-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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