Credit Risk Transfer and Financial Sector Performance

34 Pages Posted: 18 Mar 2004

See all articles by Wolf Wagner

Wolf Wagner

Erasmus University Rotterdam (EUR)

Ian W. Marsh

City University London - The Business School

Multiple version iconThere are 2 versions of this paper

Date Written: February 2004

Abstract

In this paper, we study the impact of credit risk transfer (CRT) on the stability and the efficiency of a financial system in a model with endogenous intermediation and production. Our analysis suggests that with respect to CRT, the individual incentives of the agents in the economy are generally aligned with social incentives. Hence, CRT does not pose a systematic challenge to the functioning of the financial system and is generally welfare enhancing. We identify issues that should be addressed by the regulatory authorities in order to minimize the potential costs of CRT. These include: ensuring regulatory standards that reflect differences in the social cost of instability in the banking and insurance sector; and promoting CRT instruments that are not detrimental to the monitoring incentives of banks.

Keywords: Credit risk transfer, efficiency, intermediation, stability

JEL Classification: G21, G22, G28

Suggested Citation

Wagner, Wolf and Marsh, Ian William, Credit Risk Transfer and Financial Sector Performance (February 2004). CEPR Discussion Paper No. 4265, Cass Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=519101 or http://dx.doi.org/10.2139/ssrn.519101

Wolf Wagner

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Ian William Marsh (Contact Author)

City University London - The Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 5121 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/i.marsh

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
643
Abstract Views
7,130
Rank
37,263
PlumX Metrics