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Global Financial Stability Report (GFSR), October 2009 - Chapter 2
Key points:
Sound securitization provides important benefits—to allocate credit more efficiently, transfer credit risk away from banking sector to more diversified investors, and more finely tailor risks and returns to potential end investors.
Failure to restart securitization would come at the cost of prolonged bank funding pressures and a diminution of credit, and a continuing need for central banks and governments to take up the slack.
The new model of sound securitization should leave behind the “high octane” markets of the past and establish markets that reliably fulfill lender funding needs without increasing product complexity and ramped up leverage.
The variety of proposals to restart sustainable securitization—increased capital requirements, tighter accounting standards for off-balance sheet entities, retention requirements, and enhanced disclosure requirements—all move in the right direction.
However, if all are implemented in combination, the interaction of these proposals could make restarting securitization too costly. Impact studies should be conducted before such proposals go into effect to ensure that, in combination, they foster—not suffocate—sound
securitization.
Source: International Monetary Fund
More on this topic
October 2008
Four economists conclude that the market must fix itself in order to solve the financial crisis in the United States.
In the round table organized by the Academy of Central America, the economists Juan Muñoz, Eduardo Lizano, Isaac Castro, and Jorge Guardia shared their assessment of the causes and possible solutions for the crisis that began with the fall of property prices in the United States.
November 2011
Risking future income rather than tangible assets is a good choice for investment financing, using working capital or debt restructuring.
Securitization of future income is an instrument used for the first time by the Liceo Frances on El Salvador’s Stock Exchange.
The organization placed its bonds on the market and raised capital to expand its educational facilities.
November 2008
This is the amount that the Salvadoran Foundation for Social and Economic Development recommends getting in the contingency credit.
According to a report published yesterday by the foundation "we must urge the Central Reserve (BCR) to negotiate a contingency fund of $1 billion from the IMF, making use of the new line of credit that the Bank has opened.
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