IDEAS home Printed from https://ideas.repec.org/a/taf/eurjfi/v6y2000i4p353-369.html
   My bibliography  Save this article

Structural effects of asset-backed securitization

Author

Listed:
  • Simon Wolfe

Abstract

This paper analyses the potential changes in the operational structure of deposit-taking financial institutions that securitize assets. Findings indicate that banks can create an asset securitization pipeline structure that enables them to increase their return on capital. In other words, through securitization banks can expand their loan provision business without increasing their liabilities or their capital levels. Using a contingent claims model, four factors that impact on the bank's decision to securitize are highlighted and analysed: (i) the level of deposit insurance; (ii) capital adequacy requirements; (iii) insolvency risk; and, (iv) the risk of credit enhancements. Furthermore, we identify key accounting and regulatory challenges that emerge for banks from the process of asset backed securitization.

Suggested Citation

  • Simon Wolfe, 2000. "Structural effects of asset-backed securitization," The European Journal of Finance, Taylor & Francis Journals, vol. 6(4), pages 353-369.
    • Handle: RePEc:taf:eurjfi:v:6:y:2000:i:4:p:353-369
    DOI: 10.1080/13518470050195119
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/13518470050195119
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13518470050195119?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Christine M. Cumming, 1987. "The economics of securitization," Quarterly Review, Federal Reserve Bank of New York, vol. 12(Aut), pages 11-23.
    2. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    3. Greenbaum, Stuart I. & Thakor, Anjan V., 1987. "Bank funding modes : Securitization versus deposits," Journal of Banking & Finance, Elsevier, vol. 11(3), pages 379-401, September.
    4. Hull, John, 1989. "Assessing Credit Risk in a Financial Institution's Off-Balance Sheet Commitments," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(4), pages 489-501, December.
    5. Lockwood, Larry J. & Rutherford, Ronald C. & Herrera, Martin J., 1996. "Wealth effects of asset securitization," Journal of Banking & Finance, Elsevier, vol. 20(1), pages 151-164, January.
    6. Benveniste, Lawrence M. & Berger, Allen N., 1987. "Securitization with recourse : An instrument that offers uninsured bank depositors sequential claims," Journal of Banking & Finance, Elsevier, vol. 11(3), pages 403-424, September.
    7. Stulz, ReneM. & Johnson, Herb, 1985. "An analysis of secured debt," Journal of Financial Economics, Elsevier, vol. 14(4), pages 501-521, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cardone Riportella, Clara & Samaniego Medina, Reyes & Trujillo Ponce, Antonio, 2009. "What do we know about banks securitisation? the spanish experience," DEE - Working Papers. Business Economics. WB wb093904, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    2. Jobst, Andreas A., 2002. "The Pricing puzzle: The default term structure of collateralised loan obligations," CFS Working Paper Series 2002/14, Center for Financial Studies (CFS).
    3. Vink, Dennis, 2007. "An Empirical Analysis of Asset-Backed Securitization," MPRA Paper 10382, University Library of Munich, Germany, revised 25 Aug 2008.
    4. Pituwan Poramapojn, 2012. "Effect of Securitization on the Bank’s Equity Risk in the U.S," Applied Economics Journal, Kasetsart University, Faculty of Economics, Center for Applied Economic Research, vol. 19(1), pages 68-86, June.
    5. Andreas Jobst, 2002. "Loan Securitisation: Default Term Structure and Asset Pricing Based on Loss Prioritisation," FMG Discussion Papers dp422, Financial Markets Group.
    6. Jacky Mallett, 2012. "What Are The Limits On Commercial Bank Lending?," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 15(supp0), pages 1-26.
    7. Bakoush, Mohamed & Abouarab, Rabab & Wolfe, Simon, 2019. "Disentangling the impact of securitization on bank profitability," Research in International Business and Finance, Elsevier, vol. 47(C), pages 519-537.
    8. Deku, Solomon Y. & Kara, Alper & Zhou, Yifan, 2019. "Securitization, bank behaviour and financial stability: A systematic review of the recent empirical literature," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 245-254.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liu, Benjamin & Skully, Michael, 2005. "The determinants of mortgage yield spread differentials: Securitization," Journal of Multinational Financial Management, Elsevier, vol. 15(4-5), pages 314-333, October.
    2. Vink, Dennis, 2007. "An Empirical Analysis of Asset-Backed Securitization," MPRA Paper 10382, University Library of Munich, Germany, revised 25 Aug 2008.
    3. Patir, Assaf, 2017. "Securitization, bank vigilance, leverage and sudden stops," MPRA Paper 81463, University Library of Munich, Germany.
    4. Andreas Jobst, 2002. "Loan Securitisation: Default Term Structure and Asset Pricing Based on Loss Prioritisation," FMG Discussion Papers dp422, Financial Markets Group.
    5. Ebrahim, M. Shahid & Jaafar, Aziz & Omar, Fatma A. & Salleh, Murizah Osman, 2016. "Can Islamic injunctions indemnify the structural flaws of securitized debt?," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 271-286.
    6. Gorton, Gary B. & Pennacchi, George G., 1995. "Banks and loan sales Marketing nonmarketable assets," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 389-411, June.
    7. Jobst, Andreas A., 2002. "The Pricing puzzle: The default term structure of collateralised loan obligations," CFS Working Paper Series 2002/14, Center for Financial Studies (CFS).
    8. Deku, Solomon Y. & Kara, Alper & Zhou, Yifan, 2019. "Securitization, bank behaviour and financial stability: A systematic review of the recent empirical literature," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 245-254.
    9. Gunter Franke & Jan Pieter Krahnen, 2007. "Default Risk Sharing between Banks and Markets: The Contribution of Collateralized Debt Obligations," NBER Chapters, in: The Risks of Financial Institutions, pages 603-631, National Bureau of Economic Research, Inc.
    10. Hartmann-Wendels, Thomas, 2004. "Die Bedeutung des Leasings für die Unternehmensfinanzierung: Theoretische Perspektiven und empirische Ergebnisse," Leasing - Wissenschaft & Praxis, Universität zu Köln, Forschungsinstitut für Leasing, vol. 2(2), pages 7-40.
    11. Zagonov, Maxim, 2011. "Securitization and bank intermediation function," MPRA Paper 34961, University Library of Munich, Germany, revised Sep 2011.
    12. Bonnie G. Buchanan, 2016. "Securitization: A Financing Vehicle for All Seasons?," Journal of Business Ethics, Springer, vol. 138(3), pages 559-577, October.
    13. González, Luís Otero & Rodríguez Gil, Luís Ignacio & Martorell Cunill, Onofre & Merigó Lindahl, José M., 2016. "The effect of financial innovation on European banks' risk," Journal of Business Research, Elsevier, vol. 69(11), pages 4781-4786.
    14. Buchanan, Bonnie G., 2016. "Securitization: a financing vehicle for all seasons?," Bank of Finland Research Discussion Papers 31/2016, Bank of Finland.
    15. Alper Kara & David Marques-Ibanez & Steven Ongena, 2015. "Securitization and Credit Quality," Working Papers 15013, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    16. Bakoush, Mohamed & Abouarab, Rabab & Wolfe, Simon, 2019. "Disentangling the impact of securitization on bank profitability," Research in International Business and Finance, Elsevier, vol. 47(C), pages 519-537.
    17. Rahman, Shofiqur & Chowdhury, Hasibul, 2023. "Tournament-based incentives and the lease-versus-buy decision," Journal of Banking & Finance, Elsevier, vol. 148(C).
    18. Wengerek, Sascha Tobias & Hippert, Benjamin & Uhde, André, 2022. "Risk allocation through securitization: Evidence from non-performing loans," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 48-64.
    19. Giampaolo Gabbi & Alesia Kalbaska & Alessandro Vercelli, 2014. "Factors generating and transmitting the financial crisis: The role of incentives: securitization and contagion," Working papers wpaper56, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    20. Duran, Miguel A. & Lozano-Vivas, Ana, 2013. "Off-balance-sheet activity under adverse selection: The European experience," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 176-190.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:eurjfi:v:6:y:2000:i:4:p:353-369. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/REJF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.