Financial intermediation and the post-crisis financial system

Hyun Song Shin

No 304, BIS Working Papers from Bank for International Settlements

Abstract: Securitization was meant to disperse credit risk to those who were better able to bear it. In practice, securitization appears to have concentrated the risks in the financial intermediary sector itself. This paper outlines an accounting framework for the financial system for assessing the impact of securitization on financial stability. If securitization leads to the lengthening of intermediation chains, then risks becomes concentrated in the intermediary sector with damaging consequences for financial stability. Covered bonds are one form of securitization that do not fall foul of this principle. I discuss the role of countercyclial capital requirements and the Spanish-style statistical provisioning in mitigating the harmful effects of lengthening intermediation chains.

Keywords: leverage; financial intermediation chains; financial stability (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010-03
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cba and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:304

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