Securitisation is not dead
( By Michael Heise, chief economist Allianz Group/Dresdner Bank )
(July 17, 2008)
Crises change markets. The Savings & Loans crisis pushed US banks into securitising mortgages; the European ERM crisis ultimately gave birth to the euro; the Asian debt crisis shifted the policy debate in the emerging markets and eventually strengthened them. These are some examples of past experience. What will change after the latest financial crisis? Or more specifically, what will happen to securitisation?
The economics of securitisation are still valid. From an economist's point of view, it makes perfect sense to shift credit risks around. It enables banks to originate new loans and it offers investors a new asset class with attractive risk-return profiles. It is a much more efficient way to get exposure to credit risk than, say, by investing in bank stocks or deposits.
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