engleski

Securitization market crisis and monetary policy responses

Securitization can be used to retain liquidity, increase stability and confidence in financial system and to raise the capacity for granting new loans. In a broader sense, securitization is seen as an instrument of economy and financial reshape. Since different factors have influenced the characteristics and scope of the financial crisis, the wide use of securitization cannot be considered as dominant and direct factor. As the complexity of securitization structures has become stronger with numerous innovations in financial products investors had counted on credit ratings too high without own due diligences, regulators could not estimate the amount of risk which securitized instrument bear, risk managers in financial institutions depreciated the risk of securitized assets etc. To reshape the securitization market it is necessary to deregulate total process of securitization and insert new rules and market discipline to all securitization participants especially credit rating agencies, investors and their invest policies, while both the full review of the underlying risks in highly structured securitization transactions and the scope of regulators activities must be redefined. As a result of problems described in securitization structures, revision of securitization procedures and structured products is necessary. Both in the USA and in the Europe regulators deregulate rules about securitization structures, investment policies of different investors, especially investment and hedge funds, rules about risk exposures and accounting valuation measures etc. On the top of the crises the credit risk is significantly underestimated because securities with lower quality were intensively used as collaterals in repo transactions. Furthermore, the models used for exotic structured products valuation were not adequate and they produced haircuts close to zero. The liquidity risk was also underestimated, including problems in financial institutions risk management techniques and in the systemic oversight framework of regulators. In that sense, regulators had used different highly rated structured products as collaterals in repo operations with central banks to permit cheaper wholesale funding to financial institutions, raise capacity for granting new loans and retain stability and confidence in financial system. The paper analyses positive and negative impacts of monetary measures used to retain the financial stability and survival of securitization structures in the world. In terms of monetary policy, paper analyses the crisis responses of two world important central banks that create trends on the world markets: US Federal Reserves (FED) and European Central Bank (ECB) but also the policy response of the national central bank such is the Croatian national bank (CNB). As a small open economy’s national bank, the CNB’s policy was not primary affected with the securitization problems but more with the consequences of global recession. Important question also are prospective future policies of central banks aimed in solving the aftermath of crisis measures. The aim of the paper is to analyze the connection between the crisis caused with the securitized instruments and post-crisis measures of national central banks. The important point of research is prospective central banks’ policies that would prevent the (future) crises and not only act as a firewall. Monetary policy in terms of crises need to be redefined with instruments of prevention implemented for the future periods, introduced in order to avoid consequences in financial but also in economy systems worldwide. Every new crisis opens new questions and seeks for different models that were not used before so the paper critically evaluates the methods and measures applied.

securitization; monetary policy; Federal Reserve System; European Central Bank; Croatian national bank

nije evidentirano