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Adaptability of Securitization Model to Conditions of Volatile Financial Structure

Author

Listed:
  • Bašić Dragana

    (University of Banja Luka, Faculty of Economics, Banja Luka, Republic of Srpska, Bosnia and Herzegovina)

  • Ćurić Predrag

    (NLB Bank a.d. Banja Luka, Republic of Srpska, Bosnia and Herzegovina)

Abstract

The Great Financial Crisis of 2008 exposed certain weaknesses in the field of investment banking and the necessity to adapt certain innovative solutions to the newly created economic and financial environment. The process of securitization is a financial innovation, which some financial analysts consider one of the causes of the Great Financial Crisis. Although it is often linked to the emergence of the Great Financial Crisis, the advantages of the securitization model, together with a level of adaptability and enhanced process control throughout all procedural levels, significantly outweigh its perceived shortcomings. The financial system of the Republic of Srpska continues to be characterized by the growth of nonperforming loans in bank assets, mainly caused by increased systemic risk due to the current COVID-19 pandemic and declining economic activity in the country, but also by a well-developed financial system infrastructure, which is necessary in order to allow the application of the securitization model to significantly contribute to increasing financial stability in the conditions of volatile financial structure. The model of securitization of nonperforming loans and its application in the process of bank restructuring can be the mainstay of the stabilization of the financial system. The aim of the research is to demonstrate that the application of the adapted securitization model of nonperforming assets of banks and its application in the process of bank restructuring in the conditions of unstable financial structure may contribute to financial stability and control of increase of a systemic risk. Securitization increases the supply of quality financial instruments, the number of participants in the process of transformation of financial assets and develops a more resilient financial market. The results include emergence of additional funding sources for financial institutions, generation of nonperforming assets’ problems, with additional liquidity and diversification for many of their clients.

Suggested Citation

  • Bašić Dragana & Ćurić Predrag, 2021. "Adaptability of Securitization Model to Conditions of Volatile Financial Structure," Economics, Sciendo, vol. 9(1), pages 205-219, June.
    • Handle: RePEc:vrs:econom:v:9:y:2021:i:1:p:205-219:n:4
    DOI: 10.2478/eoik-2021-0012
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    References listed on IDEAS

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    1. Cardone-Riportella, Clara & Samaniego-Medina, Reyes & Trujillo-Ponce, Antonio, 2010. "What drives bank securitisation? The Spanish experience," Journal of Banking & Finance, Elsevier, vol. 34(11), pages 2639-2651, November.
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    More about this item

    Keywords

    Securitization; Standardization; Credit Improvement; Systemic Risk; Non-Performing Loans; Bank Restructuring; Financial Stability;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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