16. Loan Sales and Securitization

2018 ◽  
Author(s):  
Ross Cranston ◽  
Emilios Avgouleas ◽  
Kristin van Zweiten ◽  
Theodor van Sante ◽  
Christoper Hare
Keyword(s):  
Financial Crisis ◽  
Credit Card ◽  
Global Financial Crisis ◽  
Capital Requirements ◽  
Loan Sales ◽  
Reduce Risk ◽  
The Global Financial Crisis ◽  
Contractual Rights

This chapter examines one context in which contracts and debts are transferred — as banks and bank subsidiaries ‘sell’ their own assets, i.e. their loans, mortgages, credit card receivables, and so on. Commercially speaking, this divides into loan sales and securitization. Among the various motivations for these transactions are to reduce risk, to meet capital requirements, to allow for new lending, and to take advantage of financial and commercial opportunities. Securitization was abused, with many risky loans repackaged and sold as highly rated securities. Its contribution to the global financial crisis in 2008 made it unpopular. However, it remains significant as a financing technique. Before examining loan sales and securitization, the chapter lays out the different legal techniques for transferring debts and contractual rights.

A Decade after Lehman: An Assessment of Key Regulatory Responses to the Global Financial Crisis

2019 ◽  
Vol 16 (4) ◽  
pp. 457-483
Author(s):  
Andreas Kerkemeyer
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Financial System ◽  
Capital Requirements ◽  
Investment Bank ◽  
Over The Counter ◽  
Basel Accords ◽  
Lehman Brothers ◽  
The Global Financial Crisis ◽  
Almost All

In September, 2008, the meltdown of the investment bank Lehman Brothers accelerated the Global Financial Crisis, which affected economies and consumers worldwide. As soon as the Global Financial Crisis broke out, governments and legislators recognized the need for macroprudential reform in order to build a resilient financial system. Today, legislators in every major jurisdiction have finalized almost all major reforms that were envisaged once it had become clear that the crisis was also due to regulatory shortcomings. The reforms especially targeted (over-the-counter) derivatives and the equity base of banks. Following an analysis of the reasons for the Global Financial Crisis and the regulatory failures that contributed to its severity this article will discuss two major legislative responses that intend to make the financial system robust – the establishment of a central dearing obligation for over-the-counter derivatives and the revised Basel Accords on capital requirements for banks.

scholarly journals Asymmetric Procyclicality of Chinese Banking and the Countercyclical Buffer of Basel III

2015 ◽  
Vol 2015 ◽  
pp. 1-9
Author(s):  
Yufeng Li ◽  
Zhongfei Li
Keyword(s):  
Financial Crisis ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Capital Requirements ◽  
Basel Iii ◽  
Time Varying ◽  
Regulatory Capital ◽  
Economy Growth ◽  
The Global Financial Crisis ◽  
Chinese Banking

Since the global financial crisis of 2007-2008, the importance of the procyclicality in the banking sector has been highlighted. One of the Basel III objectives is to promote countercyclical buffers and reduce procyclicality. We apply time-varying copula combined with GARCH model to test the existence of asymmetric procyclicality of Chinese banking. The results show that the procyclicality of Chinese banking is asymmetric, where the dependence between loan and economy growth is more correlated during the decline stage than the rise stage of economy. Based on this asymmetry, we suggest that the authority can use high frequent index for signalling the start point of releasing countercyclical buffer and accelerate the releasing pace to avoid the supply of credit being constrained by regulatory capital requirements in downturns.

scholarly journals Developing “best practices” for bankers’ pay in line with Basel III.

2011 ◽  
Vol 1 (3) ◽  
pp. 7-16 ◽  
Author(s):  
Peiyi Yu ◽  
Jessica Hong Yang ◽  
Nada Kakabadse
Keyword(s):  
Financial Crisis ◽  
Risk Taking ◽  
Global Financial Crisis ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Incentive Compensation ◽  
Basel Iii ◽  
Bank Capital ◽  
Bank Executives ◽  
The Global Financial Crisis

This paper proposes hybrid capital securities as a significant part of senior bank executive incentive compensation in light of Basel III, a new global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel Committee on Banking Supervision. The committee developed Basel III in a response to the deficiencies in financial regulation brought about by the global financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage. The hybrid bank capital securities we propose for bank executives’ compensation are preferred shares and subordinated debt that the June 2004 Basel II regulatory framework recognised as other admissible forms of capital. The past two decades have witnessed dramatic increase in performance-related pay in the banking industry. Stakeholders such as shareholders, debtholders and regulators criticise traditional cash and equity-based compensation for encouraging bank executives’ excessive risk taking and short-termism, which has resulted in the failure of risk management in high profile banks during the global financial crisis. Paying compensation in the form of hybrid bank capital securities may align the interests of executives with those of stakeholders and help banks regain their reputation for prudence after years of aggressive risk-taking. Additionally, banks are desperately seeking to raise capital in order to bolster balance sheets damaged by the ongoing credit crisis. Tapping their own senior employees with large incentive compensation packages may be a viable additional source of capital that is politically acceptable in times of large-scale bailouts of the financial sector and economically wise as it aligns the interests of the executives with the need for a stable financial system.

10 Conclusions

2020 ◽  
Keyword(s):  
Financial Crisis ◽  
Strong Correlation ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Public Law ◽  
Capital Requirements ◽  
Economic Consequences ◽  
High Quality ◽  
Private And Public ◽  
The Global Financial Crisis

This concluding chapter explains that since the 2008 global financial crisis, and largely because of it, a plethora of regulatory rules have been enacted globally to enhance financial stability. Several of these rules have had an impact on collateral transactions. First, besides a market-driven tendency to replacing unsecured finance with collateral transactions, stricter capital requirements have increased the need for banks to engage in transactions where funding is provided against high quality collateral. Second, regulatory initiatives which have been undertaken to address stability risks that materialized in the global financial crisis in the context of derivatives trading also have had an impact on the availability of high-quality collateral. Third, next to more stringent capital requirements and centralized clearing obligations, which both demand more liquidity, other regulatory rules limit the provision of liquidity. These post-crisis regulations not only have had important economic consequences on the (availability of) financial collateral, they also have important legal ramifications for collateral transactions themselves. As regards the legal (infra)structure of collateral transactions, the interaction between the private and public law rules shows a strong correlation with the interaction between supra-national and national law.

scholarly journals The Determinants of Credit Risk: An Evidence from ASEAN and GCC Islamic Banks

2020 ◽  
Vol 13 (5) ◽  
pp. 89 ◽  
Author(s):  
Faridah Najuna Misman ◽  
M. Ishaq Bhatti
Keyword(s):  
Panel Data ◽  
Financial Crisis ◽  
Credit Risk ◽  
Global Financial Crisis ◽  
Generalized Least Squares ◽  
Capital Requirements ◽  
Risk Level ◽  
Islamic Banks ◽  
Regulatory Capital ◽  
The Global Financial Crisis

In less than a decade, the Islamic Banking (IB) industry has become an essential part of the global financial system. During the last ten years, the IB industry has witnessed changes in economic conditions and proved to be resilient during the periods of financial crisis. This paper aims to examine the important issues related to credit risk in selected Islamic banks in nine countries from Association of South East Asian Nations (ASEAN) and Gulf Cooperation Council (GCC) regions. It employs the generalized least squares panel data regression, to estimate the ratio of non-performance financing to total financing as dependent variables and bank specific variables (BSV) to determine the credit risk. It uses 12 years of unbalanced panel data from 40 different Islamic banks. The overall findings show that financing quality has a significant positive effect on credit risk. It is observed that the larger IBs owned more assets with lower credit risk compared to smaller banks. The bank’s age is also an important factor influencing the credit risk level. Moreover, regulatory capital significantly reduces the credit risk exposure adherence to the minimum regulatory capital requirements which help IBs to manage their credit risk exposures. It was also observed that IBs were not affected by the global financial crisis due to less credit risk compared to the conventional banks.

scholarly journals The effects of the National Credit Act and the global financial crisis on domestic credit extension: Empirical evidence from South Africa

2012 ◽  
Vol 5 (1) ◽  
pp. 215-228 ◽  
Author(s):  
Chimwemwe Chipeta ◽  
Douglas Mbululu
Keyword(s):  
South Africa ◽  
Financial Crisis ◽  
Credit Card ◽  
Global Financial Crisis ◽  
Ordinary Least Squares ◽  
Negative Influence ◽  
Macroeconomic Factors ◽  
The Global Financial Crisis ◽  
The Impact ◽  
National Credit Act

This paper examines the impact of the new National Credit Act (NCA) No. 34 of 2005 and the global financial crisis on credit extension provided by all monetary institutions in South Africa. The econometric approach is estimated by way of ordinary least squares while controlling for several macroeconomic factors. The findings indicate that there was a general increase in the consumer credit provision in the period subsequent to the full implementation of the Act. The promulgation of the Act increases credit card, bank overdrafts, other conventional loans and total credit to the private sector categories. The implementation of the Act fails to reverse this trend but exerts a negative influence on lease finance and the global financial crisis has significant negative effects on most of the credit provision categories. The paper seeks to investigate an under-researched area on the interrelatedness of credit provider regulation, financial crises and credit extension.

scholarly journals Reflections on Northern Rock: The Bank Run that Heralded the Global Financial Crisis

2009 ◽  
Vol 23 (1) ◽  
pp. 101-119 ◽  
Author(s):  
Hyun Song Shin
Keyword(s):  
Financial Crisis ◽  
Financial Regulation ◽  
Global Financial Crisis ◽  
Capital Requirements ◽  
Coordination Failure ◽  
Short Term ◽  
Balance Sheets ◽  
High Profile ◽  
Bank Run ◽  
The Global Financial Crisis

The U.K. bank Northern Rock became the first high-profile casualty of the global financial crisis of 2007–2008 when it suffered its depositor run in September 2007. In spite of the television images of long lines of depositors outside its branch offices, the run on Northern Rock was unlike the textbook retail depositor run caused by coordination failure. Also, contrary to received wisdom, its reliance on securitization was not an immediate factor in its failure. Rather, its problems stemmed from its high leverage coupled with reliance on institutional investors for short-term funding. When the de-leveraging in the credit markets began in August 2007, Northern Rock was uniquely vulnerable to the shrinking of lender balance sheets arising from the tick-up in measured risks. Financial regulation that relies on risk-weighted capital requirements is powerless against such runs. The Northern Rock case also offers lessons concerning the economics of short-term debt.

scholarly journals COVID-19 as a Stress Test: Assessing the Bank Regulatory Framework

2021 ◽  
Vol 2021 (024) ◽  
pp. 1-47
Author(s):  
Alice Abboud ◽  
◽  
Elizabeth Duncan ◽  
Akos Horvath ◽  
Diana Iercosan ◽  
...  
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Stress Test ◽  
Banking System ◽  
Capital Requirements ◽  
Economic Damage ◽  
Trading Activity ◽  
Regulatory Approach ◽  
Potential Improvement ◽  
The Global Financial Crisis

The widespread economic damage caused by the ongoing COVID-19 pandemic poses the first major test of the bank regulatory reforms put in place following the global financial crisis. This study assesses this framework, with an emphasis on capital and liquidity requirements. Leading up to the COVID-19 crisis, banks were well-capitalized and held ample liquid assets, reflecting in part heightened requirements. Capital requirements were comparable across major jurisdictions, despite differences in the implementation of the international Basel standards. The overall robust capital and liquidity levels resulted in a resilient banking system, which maintained lending through the early stages of the pandemic. Furthermore, trading activity was a source of strength for banks, reflecting in part a prudent regulatory approach. Areas for potential improvement include addressing the cyclicality of requirements.

On the formation of a New Paradigm of fiscal Policy

2013 ◽  
pp. 152-158 ◽  
Author(s):  
V. Senchagov
Keyword(s):  
Public Finance ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Domestic Demand ◽  
Real Economy ◽  
New Paradigm ◽  
Monetary Aggregate ◽  
The Past ◽  
The Global Financial Crisis

Due to Russia’s exit from the global financial crisis, the fiscal policy of withdrawing windfall spending has exhausted its potential. It is important to refocus public finance to the real economy and the expansion of domestic demand. For this goal there is sufficient, but not realized financial potential. The increase in fiscal spending in these areas is unlikely to lead to higher inflation, given its actual trend in the past decade relative to M2 monetary aggregate, but will directly affect the investment component of many underdeveloped sectors, as well as the volume of domestic production and consumer demand.

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