Securitisation and Financial Stability

Bibliographic Data

ID9704711
AuthorsHyun Song Shin (0000-0002-0821-2759, Princeton University, corresponding author)
Year2009
Volume119
Issue536
Pages309-332
Publication date2009-03-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2008.02239.x
OpenAlexW2096304279
LanguageEN
Citations received10
References cited9

A widespread opinion before the credit crisis of 2007/8 was that securitisation enhances financial stability by dispersing credit risk. After the credit crisis, securitisation was blamed for allowing the 'hot potato' of bad loans to be passed to unsuspecting investors. Both views miss the endogeneity of credit supply. Securitisation enables credit expansion through higher leverage of the financial system as a whole. Securitisation by itself may not enhance financial stability if the imperative to expand assets drives down lending standards. The 'hot potato' of bad loans sits in the financial system on the balance sheets of large banks rather than being sold on to final investors, since the aim of financial intermediaries is to expand lending in order to utilise slack in balance sheet capacity. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009

Balance sheet · Business · Credit crunch · Economics · Financial crisis · Financial intermediary · Financial stability · Financial system · Leverage (statistics · Banking stability, regulation, efficiency · Finance · finance, banking, and market dynamics · Housing Market and Economics

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