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Title: The Economics of Asset Securitization: Lessons for Commercial Banks in Emerging Economies
Contributor(s): Farooque, Omar (author)
Publication Date: 2010
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Abstract: This paper develops a simple model showing that market intermediation replaces the bank intermediation through the advent of new risk management techniques, institutionalization of savings, investor sophistication, decline in information and transaction costs in the securities market, specialization of financial services etc. Securitization is driven by these short and long run forces. Securitization is financial intermediation, both market and bank, in which the credit/loan from commercial banks and other lenders (such as, mortgages, loans, leases etc.) are replaced by marketable debt securities that can be issued at a lower cost. It is a new category of marketable securities that are collateralized by financial assets of banks, called 'asset-backed securities' and includes a process named 'securitizing'. Securitization involves forming a pool of financial assets so that debt securities can be sold to external investors to finance the pool. This system, which has been in operation in the Western economies, can also be suitable for emerging economies in Asia to protect banks from the pressure of open market operation. The skill and extend of asset securitization is the best way of survival for banks and being competitive in a complex business environment.
Publication Type: Conference Publication
Conference Name: 12th Malaysian Finance Association Annual Conference: Re-Engineering The Financial System Towards A Global Innovation Economy, Selangor, Malaysia, 8th - 10th June, 2010
Source of Publication: Presented at the Malaysian Finance Association 12th Annual Conference
Field of Research (FOR): 150203 Financial Institutions (incl Banking)
HERDC Category Description: E2 Non-Refereed Scholarly Conference Publication
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Appears in Collections:Conference Publication
UNE Business School

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