IDEAS home Printed from https://ideas.repec.org/a/ids/ijbglo/v18y2017i2p153-166.html
   My bibliography  Save this article

Securitisation and the global financial crisis: can risk retention prevent another crisis?

Author

Listed:
  • Shanuka Senarath

Abstract

Prima facie securitisation played a prominent role in the recent global financial crisis. Moral hazard associated with securitisation is the key element behind the failure of securitisation. Risk retention is the US legislator's response to address the moral hazard issue associated with the originate-to-distribute model. This paper adopts a lexieconomic framework to analyse the risk retention provisions of the Dodd-Frank Act and proves that said provisions are not capable of eliminating moral hazard associated with securitisation. This paper argues that in order to ensure proper screening of the borrower, the cost for the lender for not engaging in proper screening and monitoring should be higher than the benefits she gains by not screening. Inter alia this paper further argues that the inclusion of non-recourse mortgages would make securitisation schemes susceptible to changes in home prices.

Suggested Citation

  • Shanuka Senarath, 2017. "Securitisation and the global financial crisis: can risk retention prevent another crisis?," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 18(2), pages 153-166.
    • Handle: RePEc:ids:ijbglo:v:18:y:2017:i:2:p:153-166
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=81945
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shanuka Senarath & Pelma Rajapakse & Jan Job de Vries Robbé & Naveen Wickremeratne & Maduka Subasinghage, 2022. "Being Naked - et Quo hinc ?: Developing a ‘Skin-in-the-Game’ Solution for Credit Default Swaps," IJFS, MDPI, vol. 10(4), pages 1-14, October.
    2. Natalya A. Khutorova, 2024. "ESG Approaches in Securitization Transactions," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 2, pages 72-87, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijbglo:v:18:y:2017:i:2:p:153-166. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=245 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.