Credit risk and securitization

Credit risk and Securitization

A Thesis Presented By

Muhammad Farooq Registration No. BM 307-844

To The Committee on Academic Degrees in partial fulfillment of the requirements for a degree with honors of B.com (Hons)

School of Accountancy and Finance The University of Lahore Session 2007-2011

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Signature Page
The thesis committee for Muhammad Farooq certifies that this is the approved version of the Following thesis:

Credit Risk and securitization

Approved by Supervising Committee Supervisor: Sir Abdul Mannan

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Dedicate to .
My honest and self made father who taught me spirit and persistence and from whom I have learnt to deal the challenges with courage and diligence.

My lovely mother who is my inexhaustible source of comfort, love and optimism.

My caring and selfless sisters who toiled laboriously for my soothe and enabled me focus upon my objectives.

&
My energetic and obedient brother.

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Acknowledgment
For whom who create us, fed us, brought us up and give usknowledge. Who is the most merciful, most beneficial and most forgiver. "Inthe name of Allah, the Merciful, the Compassionate. Say (O MuhammadSAW) He is Allah the One God, the Everlasting Refuge, who has notbegotten, nor has been begotten, and equal to Him is not anyone." For whomwho is more loving and kinder than a mother to her dear child? For whomwho is the First and the Last?I am happy that my humble thanks to them preach receipt. Firstly, I record my thanks to Sir Abdul mannan who appreciated me with encouragement, guidance and supported me from early stage to the final stage and also enabled me to understand the subject. Secondly, my bundle of thanks to my most respected class teacher Miss Hafsa Noor who gave me her precious time and helped me regarding my issues. She granted me continual support in difficulties. Without her guidance I could not be able to solve the major problems in my project. In the end I would like to thanks my dean Sir Mehboob Alam who gave me opportunity to do this task and allow me to explore my skills in front of my teachers.

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Abstract
This study is inspecting credit risk asset securitization, and test equipment associated with it. Credit rating agencies, bond market are different in their perception of risk. Measuring credit risk with the usage of credit rating, we have found that credit risk associated with securitization positive. securitized retained interest in securitized assets but not retained by the firm`s assets. However, we consistently find evidence with residential mortgage interest in an asset class. These results support the allegation of its critic`s asset securitizations, rating agencies largely ignored the growth of credit ratings, but suggest that securitizations, asset sales are treated as they see them. Measuring credit risk with the usage of bond spreads, we have found that credit risk is positive for both companies Retained interest in assets and deposits is retained by the firm`s and the portion of securitize assets is not retained firm`s.. Results indicate that the bond market does not distinguished between retained and non retained bond market shares of securitized assets, asset securitization offer ideas save as borrowings. we found that evidence relationship between types of assets, regardless securitized. source of credit risk associate with these different views of assets, accounting for nearly two securitizations provide insight into conflict utility`s credit ratings and treatment of assets securitizations.

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Table of Contents
Table of Contents.........................................................................................................................................6 Chapter 1.....................................................................................................................................................7 Introduction:............................................................................................................................................7 Relationship between credit risk and credit rating:..............................................................................7 Result of credit ratings:........................................................................................................................8 About bond spreads:............................................................................................................................8 Priors result discuss with section:........................................................................................................9 Objective:................................................................................................................................................9 Definitions of term:..................................................................................................................................9 Problems statement:.................................................................................................................................9 Hypothesis:............................................................................................................................................10 Chapter 2...................................................................................................................................................10 Literature Review:.................................................................................................................................10 Chapter 3...................................................................................................................................................14 Methodology:.........................................................................................................................................14 How to take done the research?.........................................................................................................15 How to collection the Data?...............................................................................................................15 What is my main focus?.....................................................................................................................15 What is my theoretical approach?......................................................................................................15 Descriptive statistics:.........................................................................................................................17 Chapter 4...................................................................................................................................................18 Analysis:................................................................................................................................................18 Recommendation:..................................................................................................................................20 Chapter 5...................................................................................................................................................21 Conclusion:............................................................................................................................................21 References:............................................................................................................................................22

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Chapter 1
Introduction:
This study illustrates credit risk and asset securitization, and test equipment associated with it. Credit rating agencies, bond market are different in their perception of risk. Our focus on credit risk, credit risk transfer is a key Asset securitizations and accounting problems prompted to problems. We addressing credit risk rating agencies and bond market perceptions of credit for "Critics charge that the rating agencies to evaluate the evidence was not effective "Off balance sheet" activities, in particular, credit growth, asset securitizations Classification. Asset securitizations that are positively associated with securitizing firm, Credit risk, credit rating agencies and bond market but sources differ in their views of this risk. A typical securitization transaction, a firm with a special purpose asset transfer (SPE) company and other investors in the securitization of cash received for Company's continuing involvement and interest in maintaining the flow of Assets. SPE Securitized assets can be complicated, it is not directly determine SPE's assets with a risk of danger with all assets of the firm, or And life course risks with the firm with assets of SPE. Clear about this issue, the lack of rational debate accounting treatment for asset securitizations. Accounting standards relating to asset Securitization transactions meeting the requirements for securitizations are treated as Cells. Under current accounting rules, sales treatment, to obtain risk for securitization SPE's assets must be transferred completely. If incomplete transfer of risk, i.e. Securitizing with some or all of the firm's risk, securitization is treated as safe Credit. However, the (FASB) & (IASB) for Accounting Board revisited securitizations, Boards believe that it is not always clear whether the transfer of assets In particular, securitization companies, are selling or borrowing, and thus a distinction Transaction (IASB .., 2009 FASB, 2009) is represented by economics. We offer Conflict in terms of asset securitizations issued by the Financial Reporting Credit securitized assets that are associated with firm evidence Risk, and whether credit market participants see securitizations as sales or borrowings. Relationship between credit risk and credit rating: We focus on two measures of experience Bond spreads and accounting charges related to bank holding asset securitizations Companies. We focus on banks because securitizes they are the largest group of asset data. These securitizations are available from the Federal Reserve. Use of credit ratings and Bond credit spreads on the concepts of evidence enables us to provide Two significant credit risk associated with asset securitizations are different market participants. Test results compare the two sets of allegations that the credit provides insights Effective credit risk rating agencies to assess the impact of securitizations were not. Our firm, credit risk and estimates of total securitized assets, relationship between Securitized assets and the firm, retained
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interest. We use credit ratings as before Measuring credit risk. Ratings agencies have warned that if the firm does not bear the risk of SPE assets transferred and maintained his interest only tolerate risk, we expect Total securitized assets and credit rating and positive relationship between incremental relation between credit ratings and firm, retained interest. Such a finding is consistent with credit Asset sales, securitizations, the ratings agencies see. For example, the case may be, if Firm's bankruptcy remote SPE rating agencies see as a part of. If so, instead, Credit rating agencies have reported that the firm bears the risks associated with assets transferred to SPE, our credit rating and a positive relationship between total securitized assets is expected to follow. Firm securitized, related assets for credit risk. Find a positive relationship Total securitized assets and the growing relationship between firm credit ratings and, Continued interest and that rating agencies do not maintain distinctions between non retained indicates Evaluation firm,a credit risk is part of. Such a finding is consistent with the classification Credit agencies to secure its position as East securitizations. Then we use bond spreads Measuring credit risk, and how we interpret the results of this relationship Describe the relationship between credit rating. We have evidence that credit rating agencies have reported that the firm bears only the credit risk is Associated with non-retained part of the retained interest in securitized assets Assets. In particular, we are not concerned with credit ratings of securitized significantly Assets positively and significantly related to the firm, a retained interest. These different results Earlier research on capital markets, sources of risk results Asset securitizations, which is usually concluded that the firm bears the risks associated with both Maintained and retained as part of securitized assets. Result of credit ratings: With the credit rating results, but capital market research, we contrast It is evident that the bond market seems to find both the credit risk associated with a firm that bears Maintained and retained as part of securitized assets. In particular, we find that bond Securitized assets as a whole about the significant positive spreads. Furthermore, we see that Interest in the firm's bond spreads are incrementally maintain no relationship, shows that Bond market as relevant as retained assets and retained as part Assessing credit risk. In additional analysis, we tested the association between firm credit risk and Asset securitizations vary types of securitized assets. After the first study, Residential mortgages, consumer loans, commercial credit in securitized assets. About credit rating, we found little connection between Total securitized assets Type of securitized assets and credit rating is also clear, regardless. However, we find Credit rating and maintain interest is attributable to an important relationship between Residential mortgages securitized asset types. About bond spreads: On bond spreads, we see that Total securitized assets and the relationship between small incremental the firm has maintained an interest spreads and bond with, regardless of type of asset
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is Securitized. Credit rating agencies assess a bank's credit risk rating represents. Such credit, About the rating agencies in rating asset securitizations reflect private information, but can be Influenced by other factors such as incentives for bank credit risk rating agencies Are classified as special. Overall assessment of credit risk spreads in bond is represented five Bond market participants. Thus, publicly available information about bond assets spreads reflect securitizations, incomplete, but the credit rating agency is not likely to be affected by Incentives for risk assessment of a particular level. Priors result discuss with section: Priors, resulting in more weight To determine the bond market rating agencies, then, is taken together, our Do not just call in question the justification for the treatment of asset securitizations as a result of the sale, Closing credit balance, but with diligence in assessing credit risk rating agencies Sheet securitization activities. The paper income is go behind, section two overstated on framework and motivational lesson., research, and section three 3 discuses. Section four 4 describes the basis for our Prediction and research design. Section five 5 describes the sample selection. Section six 6 presents Additional results and analysis of primary results, and Section seven 7 offers concluding remarks.

Objective:
The main objective of this study is seek to examine assets securitization always involve with the credit risk in every market but some people pledge assets and declare default. What is the process of the securitization?

Definitions of term:

1. Credit risk is a risk in which borrower failure to repay a loan. 2. Securitization is a process in which company packages its illiquid asset. 3. Asset securitization is always credit default risk.

Problems statement:
This study seeks to determine that asset securitization is always credit default risk. 1. Asset securitization always credit default risk means, asset securitization always involve with credit risk. And the securitization is finishing the credit risk. 2. Assets securitization is always credit default risk means, asset securitization is a key and play a imported role in bank sector and finish the credit risk.
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Hypothesis:
Asset securitization always credit default risk.

Chapter 2
Literature Review:
Asset securitization always involves with the credit risk and finishes the credit risk. its will prove in literature review by using the article of several researcher. Different researcher has different and same view about the securitization, So we use of articles or researches of some researchers. securitization is finish the credit risk by H. Erik (n.d.).Securitization is that who split the credit risk into some several tranches, and manage that party are willing to repay the loan means that securitization design the credit risk according to Borrower and borrower easily repay by H. comptroller (1997).Garcia, Goossen, and Lamoot (2008) explained the Impressive improvement and development in loan market for the usage of asset securitization over five years between 2002 to 2006.He conclude that if Borrower take loan on the one hand and on the other hand give asset securitization than no chance of credit risk. Acharya, Schnabl, and Suarez. (2010) explored that securitization is reduce the banking sector credit risk and transfer that risk to outsider invester. A study conduct by Wills and Sherris (2008) provide the technique that securitization is efficient alternative of insurance risk to investor. He investigate that provide insurance risk meant securitization provide the insurance on risk. In other word you will also call the securitization is a insurance risk. you can say that insurance is another name of securitization. Giddy (2000) give that how the securitization arises. When illiquid assets transfer in to security. Elul (2006) is a economist showed that transfer illiquid asset in to tradable securities is assets securitization. illiquid is a individual loan. Skara (2001) found that asset securitization a new unique use for research and risk management purposes. Graff (2006) the concept of securitization that securitization is effect on the asset value. He assume Demand curve on asset show negative elasticity if securitization shows not effect on supply curve. Nijskens and Wagner (2008) elaborate on credit risk with the help (altman, resti and sironi 2003). He considered that the first key and important part of the crisis is that credit risks. Introduce the standard credit risk. on force three key variables Probiblity first half of default is
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the loss given default and exposure at the third variable is devoted default. First estimated the RR attention. second less variable traditionally RR assumed that variable is independent of PD. Greenbaum and Thakor (1987) Securitization is a new word to illiquid financial claims, by the collection economic mediators are frequently used to express the renovation of the more tradeable.he also examine that securitization get by pooling asset &credit enhancement of pooling. An, deng and Gabriel (2008) is determine that Securitization is a process in which the pool of assets of financial intermediaries and Combination of securities to be sold again as new east pool. Benmelech, Dlugosz and Ivashina (2009) is explore Structural similarities between corporate debt and mortgage securitizations of securitizations. However, the fact that only partial results of corporate loans are securitized is to define a potential. Leverage in detail, we modified the model of a credit squeeze; a securitization is an important factor. Michalak and Uhde (2009) is found with the help of IMF, (2002) BIS, (2005) ECB, (2004) At the macro-level, credit risk securitization is recommended because it is expected that In the entire financial system a reduces in the total concentration of credit risk if risks are transferred to less ill institutions. Practicaly using a Rare sample of 743 cash if search the consequence of credit risk securitization for stability of the banking. Henke, Burghof and Rudolph (1998) is research that Credit risk is unsystematic and systematic, driven by two factors. The potential can be defined as. Liquid credit securitization, asset markets, the securities illiquid, Non-marketed assets is changing. Credit securitization market development started in Securitization of mortgage loans in the early 1970s, and securitization of credit with a significant amount of volume in the U.S. is still living. Peaslee and Nirenberg (2008) about the Securitization is normally in the area of tax planning is a defense against the action. Coles (1998) is elaborate the key of asset securitization is that The unbundling of the mortgage-processing function enables to replace. There are seven key actions for mortgage lending. First, the design of the mortgage. Second, sales and marketing loans. Third, loan packaging. Further, the administration. Fifth, grants. Sixth, assumption of risk. Seventh, crime management.. Basu (2005) founded the key concept of securitization. Securitization is a process through which homogenous illiquid financial assets are repackaged into securities and the market has been stored. Generally, bankrupty remote assets. Held. Securitization transactions, as assets are securitized assets (SPV) have been transferred to.a special purpose asset vehicle owner (originator or transferor) to customers. Ahn and Breton (2009) prove that finance securitization could use as a tactical device to soften credit market competition. Loutskina and strahan (2007) a separate legal entity known as the pool has changed the basis of sales (SPV) car. Securitization of other types of debt financing is back in less dramatic, however. In 1976, marketable Advances, business loans (marketable & manufacturing or M and M) or customer loan was a
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securitization. Ahmed (1997) deduced some sense. The new Indonesian law and the legal view on the financial asset securitization represent freshness. Dealing in securities in its broadest sense of the three forms subsumes: First, the loans for securities substituting; second, loan participations; and third, more complex technique of pooling, also known as pooling of these comments focus on the pool of cash - flow - has spawned musical instruments. Sabry and Okongwu (2009) is illustrate Securitization, The process of pooling assets in illiquid securities markets, financial markets and in particular, has a significant impact on mortgage markets. Securitization of the many benefits that borrowers, lenders and other investors the opportunity to run it. Ashcraft and steindel (2008) explained the typically securitization mortgage. The process of pooling assets in illiquid securities markets, financial markets and especially the mortgage market has had a significant impact. Many benefits of this loan securitization, lenders and other investors are being offered by the current. Made by three reasons. First, securitization is an attempt to break apart all services provided by a bank in separate services, which shall be applied by different parties. Given the current debate in the scientific literature about what is the proper way to the bank of output measure, this seems a good starting point. Secondly, we hope the reader that the services provided by the borrower of the securitized loans are more than just maintenance convincing, and so the current treatment of securitized loans in the National Accounts, which just uses the service fee income, is insufficient. Finally, we use risk-adjusted reference rate as a senior tranch (MBS). (ABS) coupon rates for customer loans, respectively, are inappropriate. Boswell (2006) said that Securitization demonstrates one way to frame the issues, particularly immigration, which, as we have seen, involves the filming of migration as an existential threat to justify a particular type of public work . Elul (2011) is found with the help of Agarwal et al (2011) See also Piskorski, Seru & Vig (2010), and Adelino et al (who dispute Piskorski et al). Riskier originations securitized debt after the measures taken may also be due. Servicers are less troubled loans in that they don `T may be encouraged to invest. Jiangli, Pritsker and Raupach (2007) find that Securitisation risk management tool for banks, and banks that use securitization reduced the risk of tail. The more highly leveraged capital structure in the selection of equity finance and tax errors to avoid is allowing.alters is that securitization provides insurance against credit defaults. Davidson and sanders (2009) is elaborate aboute the securitization. Securitization securities that can be freely transferred in a single loan is the process of change. Start securitization and investment functions to separate the functions. Securitization of loans to investors without a single transfer of ownership through a very complex process is required. Raines And Wong (2002) give the concept on securitization. Securitization is the usual amounts due have not fallen yet, but for many reasons, under the particular contract. Kothari (2002) give the advantage of business securitizationThe main Benefits of entire business securitizations of
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unchanging & balanced charge security trustee for investors who works as a shield is.it would have to oppose. Doherty And Schlesinger (2002) define Rapid securitization of risk transfer has emerged as an alternative format.He also describes the process of securitization its insurance. In insurance contracts, reinsurance product is also depend the ability of securitization. Jobst (2007) briefly explain the Asset securitization. The securitization is a very important role in his research. Transformation flexible structured liquidity and cost - efficient, risk transfer Asset securitization represent, which is the current or future value of tradable debt maturity and the difference between the Securities changed its claim to the property representation finance1 technology. Han and lai (1995) is analysis Industry.they insurance securitization in which the prosess through securitization vehicles such as credit, loans, receivables, and cash flow from leases of illiquid assets, claims, tradeable securities has changed. Cuchra and Jenkinson (2005) is funded that Securitization is a financial institution established and important way for companies, and pool their resources, as well as securitizations, the assets themselves, such as receivables, mortgage loans or financial obligations to third parties as investors.In sold, but they may be cash flow - or possibly generating businesses such as aircraft as fixed assets. Jobst (2005) is represents Securitization structured finance transactions, where the receivables portfolio of assets designated as cash flow contingent repayment claims are sold to the issuer bid to increase liquidity position and business loans by expanding the capital base of support without an increase. His research articles in (2006). Jobst has prove that Public sector institutions in advanced countries, the successful securitization of the sovereigns Asset liability management in emerging economies as a powerful tool in understanding the concept of securitization are experienced. Maddaloni and peydro (2009) are examined the activity with the help of (Rajan, 2005). The impact of low (less risk) rates in the softening of the standards may be stronger in the presence of high loans securitization activities.thay also extensive securitization. Securitization endogenous to the economy, especially to the level of short rates, for robustness securitization activities, we instrument with a time invariant indicator based on the legal framework for securitization in each country. Martin (2009) reviews the role of securitization in the credit market crisis. Credit or debt securities are securities whose acquisition of the issuance of new debt securities by pooling a set of credit. Ambrose, Little and sanders (2005) is deduced that Increase liquidity through asset securitization creates value, reduce or re-assign the credit or interest rate risk, better influence ratio to permission for the detection of earnings bookkeeping. Pagano and volpin (2010) is widely agreed with the help of Different economist and researchers improve that about the Securitization of mortgage loans in 2007-08 subprime lending crisis has played a major role. Schwarcz (2003) Securitization is indisputable advantages. As required by the originator disintermediation of banks, intermediaries, the ultimate source of funds, capital markets and

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remove the originator separate enable low-cost financing to obtain. This increasingly better allocate the risks and liquidity commitment. Telpner and taurig (2003) is funded That securitization is a financing tool. This creative, Combining and recombining new forms, including the types of assets and securities. Assets, loans, receivables, etc. from multiple vendors with multiple obligors, and many times, are collected and repackaged, sign, or other asset-backed securities sold in the form. assets provide the financing for Securitizations sellers.Gadkari, agrawal, sethia an damale (2010) is defined his research that Securitisation process where the underlying pool of assets to be organized and investor (s) from the sale of financial instruments directly or through a special purpose vehicle (SPV). Duff (1999) deduced International future flow securitizations are Create broadly defined as debt offerings A foreign originator (non-US) sponsored by And secured by receivables due from the designated International obligors. Future receivables Usually are sold directly or indirectly Home to a foreign trust by the company Release or other vehicle, which issues a debt instrument in turn. Jr., kunt and kane (2008) Defined about the securitization how to sell a direct loan securitization, a provider that can offer customers Buyers also a number of useful and monitor their position made it easy to reverse later. First loss position in the asset pool and maintain securities overcollateralizing is issued, lenders selected investor concerns about credit quality may improve Claimed back. Mcdonald and warwick (2008). Securitization framework in three main senses of doubt is tight. First, the Act narrowly to build security into a dominant actor, usually with a focus on addressing political leaders have described. Second, the Act only in the context of narrowly defined interventions with a focus on the time it is. It has been suggested that the security risk and only risk is represented by the material. Such a framework, a conceptualisation of security politics as inherently negative and reactionary, is encouraged. Gan and Mayer (2006)The creation of the securitization (and previously unexplored) Organizational expenses Separation of ownership and control of assets and equity associated with parsing Relatively thin, ownership interests in a number of tranches. He also explained that with securitization, Management takes responsibility for a third party (special servicer) troubled debt. Schwacz (1995) in many cases, securitization, an originator `s direct financing costs but also provides important indirect benefits. Securitization is the real cost, however, and therefore the only alternative sources of funding should be used after the competition.

Chapter 3
Methodology:

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Methodology depend on series of choices, For example what information and data to meet, how to evaluate the information and data that you crease. Methodology of this research topic (credit risk and securitization) is explanatory. Asset securitization is dependent variables and credit risk is independent variables. How to take done the research? With the usage of theoretical process we did the research. How to collection the Data? We take the data from different resources, prior research, online journals, websites and researches of different economist. Different researcher has different views about the securitization and credit risk.

Explained variables Credit risk Securitization

The risk that borrower Failure to repay the loan. Securitization is key that finish the credit risk securitization play imported role in bank sector.

What is my main focus? Now, we discuss that in prior years transaction of CLOs of different Eurpeon Banks from 1997s to 2004s. What is the role take a assets securitization activity in different bank and also that which have not a securitization activity. Our analyses CLO transactions of the European banks from 1997s to 2004s. What is my theoretical approach? Our theoretical approach is a step in the first two fold. the, we have a bank loan securitization and securitization that banks are not subject to loan. In analysis, we examine the properties of the bank into state bank. Various sources of information, whether or not we have every year in our data set to test the simultaneous consideration of the assets of the bank is protected. Whenever the bank by In any case one of the securitization operation, the dependent variable in regression 1, we will take, otherwise, if there is no securitization movement, i.e, it takes on the rate of 0. Contained by Ltd dependent variable model, we have a binary dependent variable to the specified requirements, where the possibility of observe a specified cost by the alternative is designed to handle in this financial entities, brief view of securitization activities. Freq. of CLO created by sample banks, N = Shows the No. of banks who is issue CLO-transaction.
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Please note that our annual sample of European banks in the securitization decision. They prefer to securitize their loans just once, while others determined to continue to Protect Your Assets. This experimental approach allows us to account for the value of the cluster. The following is a general method based on the Huber-white bank error. Descriptive statistics: In our sample for Descriptive statistics for banks during 1997 to 2004. Calculated is base on complete sample of 1948 banks.

Show general statistics about the sequence of firm specific Explanatory variable, and glimpse. From the figures, it could see that In particular, we are a very heterogeneous sample of banks with information about their risk of features, In particular, the performance of their equity capital and related holdings.18 Tier 1 capital that banks are too many different types of businesses indicate that We have to consider different types of banks - the strategy Stemming - Of course.
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In addition, wearing appropriate to switch to the new regulatory capital byasela aikyamatyate I Byasela aikyamatyate second request, that our sample is not coincidentally, also led Tier 1 capital for the relatively heterogeneous observations. We can not assume Switching time to correct our information, only we can hypothesize that large banks tended to The Bank Holdings to change their regulatory capital compared to the relatively early. Data The total sample size of the property in respect of a large mirror roughness. The same stock - listed on the Bank as additional information that could seen from Volatility, great marketplace to reserve value percentage, & beta ranges. Financial information of the regressors of parallel import Cycle. GDP - the value of the growth rate is very obvious to a large extent, Country-specific interest rate and stock market indeces. Index and a crash Interest rate improving in different countries could establish in preface Table. Different financial institutions that focus on the future of our sample are Business models and different levels of economic performance and (countryspecific) observed in the Business - cycle.

Chapter 4
Analysis:
The 1st stride in my investigation, we did not get banks to securitize loans and CLOs, and the issue does not feature in two of the total sample of differences in-means test. The univariate experiment outcome is given in Table. It is No. of observations in all cluster, mean & standard difference of the competent. Already seen, the inspection is the smallest No. of tier 1 capital to the experiment. The last column of Table, the two subsamples' means a analysis on the sameness of P - values are available. Significant results for both firm-specific variables and the outcome of the smell. It is the only firm-specific regresses in the share of equity and equity returns that can not differentiate between the two subsamples. We believe that the only country in the guise of a specific variable index does not yield a significant role. Univariate results of securitizing loans to financial institutions that we lowly - performing, low-capital ratio, a lower-quality, high liquidity and low risk with large organizations that purport to be. In addition, they are investments banking activities that generate fee income may be more strongly engaged. Macroeconomic the variables, we observe that the set of a credit default & credit downgrades (through a high risk of credit & create less misuse), high-risk, less GDP development velocity & the interest rate that will be useful for securitization.

Univariate experiment of difference in firm-specific & macroeconomic characteristics - All banks

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For example, a table (in preface) show, the proportion of firms usage securitization against Those that did not grow up in year. The model variable accounts for major difference between the financial institutions and non-securitizing securitizing. Especially France, Great Britain and Spain in the sub-group in which a significant difference. In addition, we have that lots of marketable banks are extra likely to decide the time of securitization Housing is probably less than most banks. joint through the information that the securitizing bank Payment by: extensively high payment earnings, a striking conclusion of the first accumulation of points CLOs, commercial banks may be trying to (indirectly) investment to increase their stake Their traditional business of the new equipment (securitization), the use of banking Bank loan.

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This table provides the outcome of the univariate investigation Stock - listed in the bank subsample. Although the results are similar 15 Compound word, a small firm-specific regresses guide to special conclusion reserve - the use of securitization of financial institutions have a advanced marketplace to book ratio & linked agencies for non-beta, a low-capital percentage, a high rate of income - the proportion of how much, Lower liquidity than firms that are not used for CLOs and only a small total assets. Overall, the stock - listed firms, securitizing & nonsecuritizing the distinction among Financial institutions are greatly smaller than the totality sample. In exacting, the risk characteristics of The bank is the difference among the two groups did not drive. Amazingly, The reserve - which accounts for the return of volatility is not a major difference. In this respect, our The outcome differ from Minton et al. (2004), who is that firms issuing significantly Low stock surplus stability.

Recommendation:
Due to shortage of time. I could not adding a more research but in shortage of time I could done my work much perfectively of about the credit risk and securitization. Another limitation in my work was that data could not be searched within the sites of Pakistan because the data was not available in the banks of Pakistan and I had to find it from the sites of European countries.
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Chapter 5
Conclusion:
Based on recent research on the market for credit risk transfer, these studies examine firm specific And a hint of financial institutions' decision to lead the drive Loan securitization transactions. Although we cannot reject the hypotheses of the bank loan, you can use Securitization to saving on regulatory capital, that key driving factors of the banks. Volume of the bank's decisions on securitization, credit risk, liquidity and performance. Especially Large bank default risk securitization connections to reduce exposure to guide & raise liquidity. Yet the risks - and the transfer of financial power is limited to: organizations Loan securitization is an important turning point in the liquidity of the lowest decile does not show; The highest decile of credit risk for companies, and even back to the variable effects. As a conclusion we do not think that what the state of the market for credit risk transfer can be.The second is that there is no regulatory framework for new byasela aikyamatyate will be hampered by Capital arbitrage. Rather, it is mainly an economic securitization of loans that are engineering equipment, reducing costs of financial suffering linked to bank loans. It Respect, the move of credit risk may be useful in the process of disintermediation traditionally, banks based in the European financial system. In particular, commercial Access to opportunities to market-based banking operations - the bank - and seize and possibly their risk - through a desire to increase the expected return to the feed CLO transactions.

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