Study On The Effects Of Securitization On Financial System

With its rapid development, securitization has significant effects on financial system, including financial markets, institutions and monetary policies.This dissertation analyzes the effects of secutization on financial markets, banking system, monetary policy and regulatory system. Especially, aiming at the shortcomings of the literature relative to the topic, the following three problems are studied with emphasis in this paper.Firstly, empirical study of the effects of securitization on financing cost is made with more reasonable data. Lots of scholars made empirical tests of securitization with the data of mortgage market of the U.S., where three government-sponsored enterprises (GSEs) play a key role in the secondary mortgage market. A problem arises that it is difficult to distinghish the GSEs'contribution from that of securitization itself. Australia's mortgage securitization market relies on private sector activity instead of government agencies. Therefore, this paper establishes two models containing 17 and 19 variables repectively, and makes empirical study of the effects of securitization on financing cost by using the panel data of the Australia's secondary mortgage market. Results of t-tests and regressions of this paper suggest that securitization can help reduce costs for originators and borrowers, and that policymakers and regulators should promote securitization further, which removes the doubt of some scholars.Secondly, empirical study of the effects of securitization on emerging markets has been made in this dissertation with new research methodology. There is little empirical research of the effects of securitization on emerging markets. In this paper, Perron's method of testing for structural breaks is used to investigate the effects, and the effect of reaching Brady agreements is distinguished from that of the issurance of the bonds. It is found that the introduction of bonds led to structural change in the LDC secondary debt market,and securitization helps to improve the market liquidity and and the price of the debt in emerging market nations.Thirdly, a model of least capital ratio is set up to replace the present capital adequacy calculation in this dissertation. One main negative effects of securitization is that it makes financial regulation more complicated and difficult, and it makes the risks of commercial banks more difficult to be discovered, and banks more likely to pursue risks. The reason is that there is a fault in the current calculation of capital adequacy, which motivates the banks to securitize their assets for regulatory capital arbitrage. So this paper builds a model of least capital ratio to improve the current calculation of capital adequacy to stop the banks from regulatory arbitrage, and reduces the negative effects of securitization consequently.