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Securitization in East Asia

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Author Info

  • Lejot , Paul

    (Asian Institute of International Financial Law)

  • Arner, Douglas

    ()
    (Asian Institute of International Financial Law)

  • Schou-Zibell, Lotte

    ()
    (Asian Development Bank)

Abstract

Securitization offers a range of benefits for Asia’s financial systems and economies as a mechanism to assist funding and investment. As a form of structured finance, reliable and efficient securitization can assist development by enabling financial systems to deepen and strengthen—thus contributing to overall economic growth and stability. It must be recognized, however, that there are both overt and more subtle risks in certain uses of securitization. The credit and liquidity crisis that began in the United States and spread to other developed financial systems in mid-2007 exposed the danger associated with securitization: excessive risk-taking or regulatory capital arbitrage rather than a tool to assist more conventional or conservative approaches to funding, risk management, or investment. Securitization has also been criticized for rendering financial markets opaque, while contributing to a growing emphasis in the global economy of credit intermediation conducted in capital markets rather than through banks. This study examines the institutional basis of these concerns by investigating the use of securitization in East Asia, questioning both the growth in regional activity since the 1997/98 Asian financial crisis, and the reasons for it remaining constrained. The paper concludes with a discussion of proposals to support proper development of securitization in the region, including institutional mechanisms that could better allow securitization to enhance development and financial stability. If East Asia begins to make fuller use of securitization, its motive will be to meet funding or investment needs in the real economy rather than balance sheet arbitrage of the kind that peaked elsewhere in 2007.

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Bibliographic Info

Paper provided by Asian Development Bank in its series Working Papers on Regional Economic Integration with number 12.

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Length: 73 pages
Date of creation: 01 Jan 2008
Date of revision:
Handle: RePEc:ris:adbrei:0012

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Keywords: Securitization; East Asia; debt markets; risk transfer;

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References

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Cited by:
  1. Paul Mizen & Serafeim Tsoukas, . "Evidence on the external finance premium from the US and emerging Asian corporate bond markets," Discussion Papers 06/04, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  2. Daniel Roesch & Harald Scheule, 2011. "Securitization Rating Performance and Agency Incentives," Working Papers 182011, Hong Kong Institute for Monetary Research.
  3. Warwick McKibbin & Waranya Pim Chanthapun, 2009. "Exchange Rate Regimes in the Asia-Pacific Region and the Global Financial Crisis," CAMA Working Papers 2009-30, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Bank for International Settlements, 2011. "Portfolio and risk management for central banks and sovereign wealth funds," BIS Papers, Bank for International Settlements, number 58, 8.
  5. Mangal Goswami & Sunil Sharma, 2011. "The Development of Local Debt Markets in Asia," IMF Working Papers 11/132, International Monetary Fund.
  6. Madhur, Srinivasa & Wignaraja, Ganeshan & Darjes, Peter, 2009. "Roads for Asian Integration: Measuring ADB's Contribution to the Asian Highway Network," Working Papers on Regional Economic Integration 37, Asian Development Bank.
  7. Mangal Goswami & Sunil Sharma, 2011. "The Development of Local Debt Markets in Asia : An Assessment," Finance Working Papers 23210, East Asian Bureau of Economic Research.
  8. Ballesteros, Marife M. & Dulay, Daisy S., 2013. "Feasibility of Mortgage-Backed Securitization for the Underserved Housing Market in the Philippines," Discussion Papers DP 2013-43, Philippine Institute for Development Studies.
  9. Battaglia, Francesca & Gallo, Angela, 2013. "Securitization and systemic risk: An empirical investigation on Italian banks over the financial crisis," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 274-286.
  10. Rigg, Robert & Schou-Zibell, Lotte, 2009. "The Financial Crisis and Money Markets in Emerging Asia," Working Papers on Regional Economic Integration 38, Asian Development Bank.

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