Securitization Pros & Cons

Financial regulation is necessary and without an efficient set of regulations a country could see rises in unemployment, interest rates, and the deterioration of financial intermediaries. With the globalization of the financial industry, it becomes more and more common for businesses to seek financing outside of their county 's boarders. These innovations in the financial industry stress why it is so important for regulations to be created and changed to reduce risk and asymmetric information in financial systems.

A variety of new trends and innovations have expand in banking industry. Some are positive and negative, but some show a mix of plus and minus. Government has been really concern and increasingly keeping eyes on these case, especially after 2008 financial crisis.

With regard to sukuk development, the asset securitisation law in Indonesia is not in line with Shari’ah dictates, as the draft of the asset securitisation law clearly states that securitisation can only be structured through debt. Meanwhile, Malaysia, which is the most active Islamic capital market, has robust regulatory standards as framed by the Securities Commission

The success of the Islamic financial industry over the last two decades has lead new challenges related to liquidity management. Particularly, the Islamic capital market provides the component of liquidity to the alternatively illiquid assets. This is accomplished by selling a wide arrange of products structures from Shari’ah-compliant securities to bond-like structures known as Sukuk. Indirectly, this has increase economic activities based on Shari’ah. Even though the Islamic Capital Market uses the same market facility as the conventional, but the two have quite a different component and activity (Securities Industry Development Centre (SIDC),

“ Concentration has made the financial sector more fragile by creating a few large institutions that dominate more than half of the sector. The top 18 banks currently hold about 60 percent of total assets with the top 4 holding about 40 percent (this is even higher than pre-crisis levels)—compared with only 23 percent of total bank assets in 1992. Further, as compared with 1992, these are now “universal banks,” permitted to engage in a wide range of financial activities, from commercial banking to investment banking and to insurance.

“Securitisation is the process whereby loans, receivables and other financial assets are pooled together, with their cash flows or economic values redirected support payments on related securities.” “Securitization first emerged in the 1970s with the sale of securities backed by residential mortgages”. (Dov Solomon, 2012) The narrow sense of securitisation

The financial markets are increasingly and highly interconnected, which means that the regulation of the financial services is becoming globalised as well, since most of the bigger firms operate all over the globe, the standardization of the regulation is a very common practice nowadays, making very difficult especially for developing countries keep up with the regulation. The financial crisis of 2008 was one of the most devastating and longest crises the contemporary world has seen, after the crisis a set of reforms, institutions and regulation were created, to avoid this happening again.

Securitisation will be discussed later on. New Technology New technology has reduced barriers to entry. Originally the banking sector was based on branch networks; in order to operate overseas, a bank required a branch in that country. Now, thanks to new technology, in particular the internet, the physical presence of a bank is not as important and branches are no longer a requirement to operating overseas as physical proximity does not determine where money can be raised. For example electronic trading technology has allowed the creation of companies such as E*Trade and is providing new distribution channels and shifting the balance of power to the consumer. Thus technology has changed the way in which money is lent and banks have had to become more innovative both in the way in which their financial services are delivered and the services they offer. Direct banking (telephone and internet banking) is becoming comparatively more important and the branch network, which used to be a major competitive advantage because it created a barrier to entry is now becoming one of banks’ most expensive problems (Llewellyn 2

Any government or corporation requires capital (funds) to finance its operations and to engage in its own long-term investments. To do this, a company raises money through the sale of securities - stocks and bonds in the company's name. These are bought and sold in the capital markets and are known as long term securities.

Securitisation is a sophisticated process with many partakers involved, this essay will discuss each member before discussing the process. The participants of securitisation include: originator, Special purpose vehicle (SPV) or Structured investment vehicle (SIV), credit enhancer, credit rating agency, trustee, servicer, borrowers, underwriter and investors.

List of abbreviations List of tables Acknowledgements Abstract 1. 2. 3. 4. 5. 6. 7. 8. Introduction Problem statement Objectives and hypothesis of the study Literature review Structure and performance of the financial sector in

In keeping by generally told of this international that a way, it is observed, that banks in India aside from have been chiefly outsourcing distinctive activities. Needles to defend, a well-known outsourcing, procreate banks as a result of like a clay pigeon to at variance risks as busy in para 1.3. Further, the outsourcing activities are to be brought within regulatory field of reference and the interests of the customer’s ised responsible for be protected.

In this article author Alka Sharma discuss about the economic reforms that took place in Indian financial sector. This type of reforms has gaining more importance as financial intermediaries and also help in opening new opportunity for growth and development of various financial services. As a result of this new reforms there is a shift in financial services from quantitative to qualitative services. Financial institution is highly

□ Higher rates than comparable treasury bills because of higher default risk than government securities

The banking sector in emerging economies has witnessed major changes to compete, attract international investment and increase capital market growth. Banking crisis usually starts with inability of the bank to meet its financial obligations to its stakeholders. This, in most cases, precipitates runs on banks, the banks and their customers engage in massive credit recalls and withdrawals which sometimes necessitate Central Bank liquidity support to the affected banks. Some terminal intervention mechanisms may occur in the form of consolidation (mergers and acquisitions), recapitalization, use of bridge banks, establishment of asset management companies to assume control and recovery of bank assets, and outright liquidation of non redeemable banks. Bank consolidation, which is at the core of most banking system reform programmes, occurs, some of the time, independent of any banking crisis. Irrespective of the cause, however, bank consolidation is implemented to strengthen the banking system, embrace globalization, improve healthy competition, exploit economies of scale, adopt advanced technologies, raise efficiency and improve profitability(eseoghene,2010). Ultimately, the goal is to strengthen the intermediation role of banks and to ensure that they are able to perform