Financial Intermediation and the Post-Crisis Financial System

38 Pages Posted: 5 May 2010

See all articles by Hyun Song Shin

Hyun Song Shin

Bank for International Settlements (BIS)

Date Written: March 2010

Abstract

Securitization was meant to disperse credit risk to those who were better able to bear it. In practice, securitization appears to have concentrated the risks in the financial intermediary sector itself. This paper outlines an accounting framework for the financial system for assessing the impact of securitization on financial stability. If securitization leads to the lengthening of intermediation chains, then risks becomes concentrated in the intermediary sector with damaging consequences for financial stability. Covered bonds are one form of securitization that do not fall foul of this principle. I discuss the role of countercyclial capital requirements and the Spanish-style statistical provisioning in mitigating the harmful effects of lengthening intermediation chains. See also, http://ssrn.com/abstract=1699600.

Keywords: leverage, financial intermediation chains, financial stability

JEL Classification: E51, G20, G21

Suggested Citation

Shin, Hyun Song, Financial Intermediation and the Post-Crisis Financial System (March 2010). BIS Working Paper No. 304. Available at SSRN: https://ssrn.com/abstract=1599486 or http://dx.doi.org/10.2139/ssrn.1599486

Hyun Song Shin (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

Register to save articles to
your library

Register

Paper statistics

Downloads
875
Abstract Views
5,478
rank
26,072
PlumX Metrics