Credit Risk Transfer As A Mechanism Of Protection Against Risks Cover Image

Transfer kreditnog rizika kao mehanizam zaštite od rizika
Credit Risk Transfer As A Mechanism Of Protection Against Risks

Author(s): Borislav Radević, Ahmedin S. Lekpek
Subject(s): Economy
Published by: Универзитет у Нишу
Keywords: credit risk transfer; securitization; banks; hedge funds; instruments of credit risk transfer

Summary/Abstract: Increasing instability within the operations of financial markets, primarily in the banking sector, has led to the regulatory authorities' deciding to adopt a set of new regulations to ensure that the operations in the financial sector stabilize and prevent the frequent crisis. One of the key rules that are imposed on banks is disposal of mandatory capital, which has a protective role in terms of financial defense position of banks in case of emergencies. The amount of regulatory capital is directly linked to loans risk, primarily, loans of the banks, which have encouraged banks to engage in more secure investments. However, the required capital has reduced the possibility of bank lending and thus significantly affects their profitability. Considering that they could not ignore the imposed rules, the banks have found escape from this situation in new mechanism of operation, so called transfer credit risk. They have decided that certain loans, particularly risk ones, which hold a significant amount of regulatory capital and thus reduce the bank's investment potential, be secured, i.e. converted into securities and then sold on the market. Therefore, the essence of this work is to become acquainted with the process of credit risk transfer, its instruments and the reasons for its implementation, as well as financial institutions, which are involved in this process.

  • Issue Year: 2010
  • Issue No: 4
  • Page Range: 385-393
  • Page Count: 9
  • Language: English