Securitization and Capital Implications

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1、SecuritizationandCapitalImplicationsUndertheBaselIIAccordByMatthewBergeruringthecreditcrisisof2009,investorsandCreditratingagenciesareoftenslowtoalterrat-Dbankinginstitutionsrealizedthatadequacyofingsastheyattempttodistinguishbetweenshorttermcapitalwithinagivenbankwasdifficul

2、ttojudge.trendsversuslongertermchangesinmarketcondi-Assetsthatwereconsideredsafeforlengthyperiodstions.Oftentimes,marketparticipantshaveforecastedoftimesuddenlywereviewedasriskyandworththesecreditratingchangespriortotheactualoccur-afractionoftheinitialinvestment.Thisrealiza-r

3、ence.Thisspeculationresultsindecreasedsharepricestioncameatatimeshortlyafterbankingregulatorspriortotheratingchangeandmayresultinfurtherreleasednewmethodstojudgecapitaladequacy.depressionofpricefollowingtheratingchange.TheseThesenewmethodsaremorefluidinnaturethantheratingchan

4、geswillultimatelyrequirebankinginsti-predecessorsandemployformulaswhichtakeintotutionstoraiseadditionalregulatorycapital,whichaccountfactorsthatmustbeestimatedbybanksandoftenoccursthroughcommonstockequityissuance.approvedbyregulators.However,thefluidnatureoftherevisedinputsto

5、thecapitaladequacyformularesultsintheneedforthisThedocumentgoverningcapitaladequacyforregulatorycapitalatatimewhenitismostexpensivebankinginstitutionsisreferredtoastheBaselAccord.forthebanktoraisetheadditionalcapital.Thus,banksInitially,Baselutilizedseveralfixedpercentageweig

6、ht-willhaveanecessary,expensivecapitalraiseifneitheringamountsforeachassetofabank.However,asthebanknorthecreditratingagenciestimelyforecastassetsbecamemorecomplex,theBaselAccordwasthechangeinriskoftheunderlyingassetsofabank’srevisedandsetforthothermethodstocalculatevariouspor

7、tfolio.instrumentsusingavarietyofinputs.Theseinputsareoftenbasedonbanks’internalforecastsandratingsandThisarticlereachestheaboveconclusionbyfirstdis-includeitemssuchasanasset’sprobabilityofdefault,cussingthetypicalmethodsandcostofraisingcapital.lossgivendefault,exposureatdefa

8、ult,andtimetoTheratingagencycompaniesandtheirregulationsarematurity.