de Gioia Carabellese, Pierre --- "Securitization and structured finance: from shadow banking to legal harmonization?" [2018] ELECD 351; in Chiu, H.-Y. Iris; MacNeil, G. Iain (eds), "Research Handbook on Shadow Banking" (Edward Elgar Publishing, 2018) 117

Book Title: Research Handbook on Shadow Banking

Editor(s): Chiu, H.-Y. Iris; MacNeil, G. Iain

Publisher: Edward Elgar Publishing

ISBN: 9781785362620

Section: Chapter 4

Section Title: Securitization and structured finance: from shadow banking to legal harmonization?

Author(s): de Gioia Carabellese, Pierre

Number of pages: 44

Abstract/Description:

Securitizations affect the way a credit institution operates. Alongside structured finance, they allow a bank to free capital and transform risk management. Securitizations allow lenders to refinance a set of loans or assets via their conversion into securities. As the lender organizes a portfolio of its loans in different categories of risk also according to the risk appetite of each investor, the cash flows of the underlying loans represent the returns to the investors. However, structured finance transactions have been identified among the main culprits for the 2008 financial crisis. As such, these transactions may pose a considerable threat to the stability of financial markets. Thus, securitizations, the stereotypical transactions of this kind, have challenged the supervisory authorities, given the dearth of regulation in this area until a decennium ago. Nevertheless, securitization markets are still believed to provide operators with unique opportunities to raise finance through alternative funding and diversified funding sources.