In a model where banks play an active role in monitoring borrowers, we analyze the impact of securitization on bankers’ incentives across different macroeconomic scenarios. We show that securitization can be part of the optimal financing scheme for banks, provided banks retain an equity tranche in the sold loans to maintain proper incentives. In economic downturns however securitization should be restricted. The implementation of the optimal solvency scheme is achieved by setting appropriate capital charges through a form of capital insurance, protecting the value of bank capital in downturns, while providing additional liquidity in upturns

Cerasi, V., & Rochet, J.C. (2014). Rethinking the regulatory treatment of securitization. JOURNAL OF FINANCIAL STABILITY, 10(1), 20-31 [10.1016/j.jfs.2012.10.002].

Rethinking the regulatory treatment of securitization

CERASI, VITTORIA;
2014

Abstract

In a model where banks play an active role in monitoring borrowers, we analyze the impact of securitization on bankers’ incentives across different macroeconomic scenarios. We show that securitization can be part of the optimal financing scheme for banks, provided banks retain an equity tranche in the sold loans to maintain proper incentives. In economic downturns however securitization should be restricted. The implementation of the optimal solvency scheme is achieved by setting appropriate capital charges through a form of capital insurance, protecting the value of bank capital in downturns, while providing additional liquidity in upturns
Articolo in rivista - Articolo scientifico
Scientifica
Solvency regulation; Securitization; Capital insurance; Monitoring
English
Cerasi, V., & Rochet, J.C. (2014). Rethinking the regulatory treatment of securitization. JOURNAL OF FINANCIAL STABILITY, 10(1), 20-31 [10.1016/j.jfs.2012.10.002].
Cerasi, V; Rochet, J
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/48471
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