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Securitization in East Asia

Author

Listed:
  • 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 Asiaâs 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 strengthenâthus 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.

Suggested Citation

  • Lejot , Paul & Arner, Douglas & Schou-Zibell, Lotte, 2008. "Securitization in East Asia," Working Papers on Regional Economic Integration 12, Asian Development Bank.
  • Handle: RePEc:ris:adbrei:0012
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Goswami, Mangal & Sharma, Sunil, 2011. "The Development of Local Debt Markets in Asia: An Assessment," ADBI Working Papers 326, Asian Development Bank Institute.
    2. Douglas W. Arner & Lotte Schou-Zibell, 2011. "Asian Regulatory Responses to the Global Financial Crisis," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 3(1), pages 135-169, January.
    3. 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.
    4. 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.
    5. 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.
    6. Bank for International Settlements, 2011. "Portfolio and risk management for central banks and sovereign wealth funds," BIS Papers, Bank for International Settlements, number 58.
    7. McKibbin, Warwick J. & Chanthapun, Waranya Pim, 2009. "Exchange Rate Regimes in the Asia-Pacific Region and the Global Financial Crisis," Working Papers on Regional Economic Integration 36, Asian Development Bank.
    8. Paul Mizen & Serafeim Tsoukas, 2006. "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).
    9. Daniel Rösch & Harald Scheule, 2011. "Securitization rating performance and agency incentives," BIS Papers chapters, in: Bank for International Settlements (ed.), Portfolio and risk management for central banks and sovereign wealth funds, volume 58, pages 287-314, Bank for International Settlements.
    10. Batten, Jonathan A. & Szilagyi, Peter G., 2012. "International banking during the Global Financial Crisis: U.K. and U.S. perspectives," International Review of Financial Analysis, Elsevier, vol. 25(C), pages 136-141.
    11. Bertay, A.C., 2014. "Essays on the impact of government policy, internationalization and financial innovation on financial stability," Other publications TiSEM 709fc70f-59d5-4fdc-a029-3, Tilburg University, School of Economics and Management.
    12. 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.
    13. Mr. Mangal Goswami & Mr. Sunil Sharma, 2011. "The Development of Local Debt Markets in Asia," IMF Working Papers 2011/132, International Monetary Fund.

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    More about this item

    Keywords

    Securitization; East Asia; debt markets; risk transfer;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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