Structured Finance Influence on Financial Market Stability – Evaluation of Current Regulatory Developments
AbstractIn 2007 the world faced one of the biggest financial crises ever. It was the third important financial crisis in the last 12 years. Spillovers to the real economy and moral hazard behaviour of carpetbaggers resulted in enormous pressure on worldwide political institutions to approve a more rigorous regulation on financial institutions and to predict financial crises via early warning systems. We analyzed the performance of structured finance ratings and structured finance issuance/outstanding to detect the main shortcomings of the subprime crisis. Afterwards, we explain the behaviour of market participants with theoretical models and a survey of institutions involved in securitization. With the conclusions of this analysis we evaluate the EU regulation on credit rating agencies and current Basel II enhancements. Finally we can determine that most regulatory enhancements are in accordance with our analyzed shortcomings. Some approaches like the introduction of a leverage ratio are counterproductive and a danger for worldwide economic growth.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 23574.
Date of creation: 30 Jun 2010
Date of revision:
Structured Finance; Ratings; Regulation; Subprime Crisis; Basel II; Leverage Ratio;
Find related papers by JEL classification:
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-10 (All new papers)
- NEP-REG-2010-07-10 (Regulation)
- NEP-RMG-2010-07-10 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barrell, Ray & Davis, E. Philip & Karim, Dilruba & Liadze, Iana, 2010.
"Bank regulation, property prices and early warning systems for banking crises in OECD countries,"
Journal of Banking & Finance,
Elsevier, vol. 34(9), pages 2255-2264, September.
- Ray Barrell & Davis, E. & Liadze, I. & Dilruba Karim, 2009. "Bank Regulation, Property Prices And Early Warning Systems For Banking Crises In Oecd Countries," NIESR Discussion Papers 330, National Institute of Economic and Social Research.
- Bhattacharya, S. & Boot, A.W.A. & Thakor, A.V., 1995.
"The Economics of Bank Regulation,"
9516, Centro de Estudios Monetarios Y Financieros-.
- Marc Quintyn & Donato Masciandaro & MarÃa Nieto, 2009. "Will they Sing the Same Tune? Measuring Convergence in the new European System of Financial Supervisors," IMF Working Papers 09/142, International Monetary Fund.
- Claudio Borio & Mathias Drehmann, 2009. "Assessing the risk of banking crises - revisited," BIS Quarterly Review, Bank for International Settlements, March.
- de Bandt, Olivier & Hartmann, Philipp, 2000.
"Systemic Risk: A Survey,"
CEPR Discussion Papers
2634, C.E.P.R. Discussion Papers.
- Guenter Franke, 2005.
"Transformation nicht-gehandelter in handelbare Kreditrisiken ,"
TWI Research Paper Series
7, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
- Günter Franke, 2004. "Transformation nicht-gehandelter in handelbare Kreditrisiken," CoFE Discussion Paper 04-08, Center of Finance and Econometrics, University of Konstanz.
- Paul S. Mills & John Kiff, 2007. "Money for Nothing and Checks for Free: Recent Developments in U.S. Subprime Mortgage Markets," IMF Working Papers 07/188, International Monetary Fund.
- E. Philip Davis & Dilruba Karim, 2008. "Could Early Warning Systems Have Helped To Predict the Sub-Prime Crisis?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 206(1), pages 35-47, October.
- Agarwal, Sumit & Ambrose, Brent W. & Chomsisengphet, Souphala & Liu, Chunlin, 2006. "An empirical analysis of home equity loan and line performance," Journal of Financial Intermediation, Elsevier, vol. 15(4), pages 444-469, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.