How exactly does this securitization influence the credit expansion and business cycle?
The very first effectation of securitization is always to move the credit danger of the loans from the banking institutions’ balance sheets towards the investors through asset-backed securities (Gertchev, 2009). This ‘regulatory arbitrage enables that are to circumvent book and money adequacy demands and, consequently, to enhance their credit expansion. Simply because banking institutions need certainly to hold a minimum standard of regulatory money with regards to risk-weighted assets. When banking institutions offer the pool of high-risk loans up to an entity that is third they reduce steadily the number of high-risk assets and enhance their money adequacy ratio. By doing so, the transfer of loans increases banks’ prospective to produce further loans without increasing money. 11
The part of shadow banking in credit expansion are illustrated because of the proven fact that assets within the shadow bank operating system expanded quickly prior to the crisis, from $27 trillion in 2002 to $60 trillion in 2007, which coincided with razor- sharp growth additionally in bank assets (Financial Stability Board, 2011, p. 8). 阅读更多