Credit Risks and Securitizattion

8/3/2019 Credit Risks and Securitizattion

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Credit risk and securitization

Credit risk and Securitization

A Thesis Presented

By

Muhammad Farooq

Registration No. BM 307-844

To

The Committee on Academic Degrees

in partial fulfillment of the requirements

for a degree with honors

of B.com (Hons)

School of Accountancy and Finance

The University of LahoreSession 2007-2011

University of Lahore Page 1


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Signature Page

The thesis committee for Muhammad Farooq certifies that this is the

approved version of the Following thesis:

Credit Risk and securitization

Approved by

Supervising Committee

Supervisor: Sir Abdul Mannan



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Dedicate to .

My honest and self made father who taught me spirit and persistence

and from whom I have learnt to deal the challenges with courage and

diligence.

My lovely mother who is my inexhaustible source of comfort, love

and optimism.

My caring and selfless sisters who toiled laboriously for my soothe

and enabled me focus upon my objectives.

&

My energetic and obedient brother.



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Acknowledgment

For whom who create us, fed us, brought us up and give usknowledge. Who is the most

merciful, most beneficial and most forgiver. "Inthe name of Allah, the Merciful, the

Compassionate. Say (O MuhammadSAW) He is Allah the One God, the Everlasting Refuge,

who has notbegotten, nor has been begotten, and equal to Him is not anyone." For whomwho is

more loving and kinder than a mother to her dear child? For whomwho is the First and the Last? I

am happy that my humble thanks to them preach receipt.

Firstly, I record my thanks to Sir Abdul mannan who appreciated me

with encouragement, guidance and supported me from early stage to the

final stage and also enabled me to understand the subject.

Secondly, my bundle of thanks to my most respected class teacher

Miss Hafsa Noor who gave me her precious time and helped me regarding

my issues. She granted me continual support in difficulties. Without her

guidance I could not be able to solve the major problems in my project. In

the end I would like to thanks my dean Sir Mehboob Alam who gave me

opportunity to do this task and allow me to explore my skills in front of my

teachers.



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Abstract

This study is inspecting credit risk asset securitization, and test equipment associated with it.

Credit rating agencies, bond market are different in their perception of risk. Measuring credit risk

with the usage of credit rating, we have found that credit risk associated with securitizationpositive. securitized retained interest in securitized assets but not retained by the firm`s assets.

However, we consistently find evidence with residential mortgage interest in an asset class.

These results support the allegation of its critic`s asset securitizations, rating agencies largely

ignored the growth of credit ratings, but suggest that securitizations, asset sales are treated as

they see them. Measuring credit risk with the usage of bond spreads, we have found that credit

risk is positive for both companies Retained interest in assets and deposits is retained by the

firm`s and the portion of securitize assets is not retained firm`s.. Results indicate that the bond

market does not distinguished between retained and non retained bond market shares of

securitized assets, asset securitization offer ideas save as borrowings. we found that evidence

relationship between types of assets, regardless securitized. source of credit risk associate with

these different views of assets, accounting for nearly two securitizations provide insight into

conflict utility`s credit ratings and treatment of assets securitizations.



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Table of Contents

Table of Contents .........................................................................................................................................6

Chapter 1 ............................................................................................................................................ .........7

Introduction: ............................................................................................................................................7

Relationship between credit risk and credit rating: .................................................................... ..... .....7

Result of credit ratings: ...................................................................................................................... ..8

About bond spreads: ............................................................................................................................8

Priors result discuss with section: ........................................................................................... ..... ..... ...9

Objective: .......................................................................................................................................... ......9

Definitions of term: ..................................................................................................................................9

Problems statement: ............................................................................................................................... ..9

Hypothesis: ............................................................................................................................................10

Chapter 2 ...................................................................................................................................................10

Literature Review: .................................................................................................................................10

Chapter 3 ...................................................................................................................................................14

Methodology: .........................................................................................................................................14

How to take done the research? .................................................................................... ..... ..... ..... ..... .15

How to collection the Data? ...............................................................................................................15

What is my main focus? .....................................................................................................................15

What is my theoretical approach? ................................................................................................ ..... .15

Descriptive statistics: .................................................................................................................. ..... ..17

Chapter 4 ...................................................................................................................................................18

Analysis: ................................................................................................................................................18

Recommendation: ..................................................................................................................................20

Chapter 5 ...................................................................................................................................................21

Conclusion: ..................................................................................................................................... ..... ..21

References: .......................................................................................................................................... ..22



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Chapter 1

Introduction:This study illustrates credit risk and asset securitization, and test equipment associated with it.

Credit rating agencies, bond market are different in their perception of risk. Our focus on credit

risk, credit risk transfer is a key Asset securitizations and accounting problems prompted to

problems. We addressing credit risk rating agencies and bond market perceptions of credit for

"Critics charge that the rating agencies to evaluate the evidence was not effective "Off balance

sheet" activities, in particular, credit growth, asset securitizations Classification. Asset

securitizations that are positively associated with securitizing firm, Credit risk, credit rating

agencies and bond market but sources differ in their views of this risk.

A typical securitization transaction, a firm with a special purpose asset transfer (SPE) companyand other investors in the securitization of cash received for Company's continuing involvement

and interest in maintaining the flow of Assets. SPE Securitized assets can be complicated, it is

not directly determine SPE's assets with a risk of danger with all assets of the firm, or And life

course risks with the firm with assets of SPE. Clear about this issue, the lack of rational debate

accounting treatment for asset securitizations. Accounting standards relating to asset

Securitization transactions meeting the requirements for securitizations are treated as Cells.

Under current accounting rules, sales treatment, to obtain risk for securitization SPE's assets

must be transferred completely. If incomplete transfer of risk, i.e. Securitizing with some or all

of the firm's risk, securitization is treated as safe Credit. However, the (FASB) & (IASB) for

Accounting Board revisited securitizations, Boards believe that it is not always clear whether thetransfer of assets In particular, securitization companies, are selling or borrowing, and thus a

distinction Transaction (IASB .., 2009 FASB, 2009) is represented by economics. We offer

Conflict in terms of asset securitizations issued by the Financial Reporting

Credit securitized assets that are associated with firm evidence Risk, and whether credit market

participants see securitizations as sales or borrowings.

Relationship between credit risk and credit rating:

We focus on two measures of experience Bond spreads and accounting charges related to bank

holding asset securitizations Companies. We focus on banks because securitizes they are the

largest group of asset data. These securitizations are available from the Federal Reserve. Use ofcredit ratings and Bond credit spreads on the concepts of evidence enables us to provide Two

significant credit risk associated with asset securitizations are different market participants. Test

results compare the two sets of allegations that the credit provides insights Effective credit risk

rating agencies to assess the impact of securitizations were not. Our firm, credit risk and

estimates of total securitized assets, relationship between Securitized assets and the firm, retained



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interest. We use credit ratings as before Measuring credit risk. Ratings agencies have warned that

if the firm does not bear the risk of SPE assets transferred and maintained his interest only

tolerate risk, we expect Total securitized assets and credit rating and positive relationship

between incremental relation between credit ratings and firm, retained interest. Such a finding is

consistent with credit Asset sales, securitizations, the ratings agencies see. For example, the case

may be, if Firm's bankruptcy remote SPE rating agencies see as a part of. If so, instead,

Credit rating agencies have reported that the firm bears the risks associated with assets

transferred to SPE, our credit rating and a positive relationship between total securitized assets is

expected to follow.

Firm securitized, related assets for credit risk. Find a positive relationship Total securitized assets

and the growing relationship between firm credit ratings and, Continued interest and that rating

agencies do not maintain distinctions between non retained indicates Evaluation firm,a credit risk

is part of. Such a finding is consistent with the classification Credit agencies to secure its

position as East securitizations. Then we use bond spreads Measuring credit risk, and how we

interpret the results of this relationship Describe the relationship between credit rating. We have

evidence that credit rating agencies have reported that the firm bears only the credit risk is

Associated with non-retained part of the retained interest in securitized assets Assets. In

particular, we are not concerned with credit ratings of securitized significantly Assets positively

and significantly related to the firm, a retained interest. These different results Earlier research on

capital markets, sources of risk results Asset securitizations, which is usually concluded that the

firm bears the risks associated with both Maintained and retained as part of securitized assets.

Result of credit ratings:

With the credit rating results, but capital market research, we contrast It is evident that the bond

market seems to find both the credit risk associated with a firm that bears Maintained and

retained as part of securitized assets. In particular, we find that bond Securitized assets as a

whole about the significant positive spreads. Furthermore, we see that Interest in the firm's bond

spreads are incrementally maintain no relationship, shows that Bond market as relevant as

retained assets and retained as part Assessing credit risk. In additional analysis, we tested the

association between firm credit risk and Asset securitizations vary types of securitized assets.

After the first study, Residential mortgages, consumer loans, commercial credit in securitized

assets. About credit rating, we found little connection between Total securitized assets Type of

securitized assets and credit rating is also clear, regardless. However, we find Credit rating andmaintain interest is attributable to an important relationship between Residential mortgages

securitized asset types.

About bond spreads:

On bond spreads, we see that Total securitized assets and the relationship between small

incremental the firm has maintained an interest spreads and bond with, regardless of type of asset



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is Securitized. Credit rating agencies assess a bank's credit risk rating represents. Such credit,

About the rating agencies in rating asset securitizations reflect private information, but can be

Influenced by other factors such as incentives for bank credit risk rating agencies Are classified

as special. Overall assessment of credit risk spreads in bond is represented five Bond market

participants. Thus, publicly available information about bond assets spreads reflect

securitizations, incomplete, but the credit rating agency is not likely to be affected by Incentives

for risk assessment of a particular level.

Priors result discuss with section:

Priors, resulting in more weight To determine the bond market rating agencies, then, is taken

together, our Do not just call in question the justification for the treatment of asset securitizations

as a result of the sale, Closing credit balance, but with diligence in assessing credit risk rating

agencies Sheet securitization activities. The paper income is go behind, section two overstated on

framework and motivational lesson., research, and section three 3 discuses. Section four 4

describes the basis for our Prediction and research design. Section five 5 describes the sample

selection. Section six 6 presents Additional results and analysis of primary results, and Section

seven 7 offers concluding remarks.

Objective:

The main objective of this study is seek to examine assets securitization always involve with the

credit risk in every market but some people pledge assets and declare default. What is the

process of the securitization?

Definitions of term:

1. Credit risk is a risk in which borrower failure to repay a loan.

2. Securitization is a process in which company packages its illiquid asset.

3. Asset securitization is always credit default risk.

Problems statement:

This study seeks to determine that asset securitization is always credit default risk.

1. Asset securitization always credit default risk means, asset securitization always involve with

credit risk. And the securitization is finishing the credit risk.

2. Assets securitization is always credit default risk means, asset securitization is a key and play

a imported role in bank sector and finish the credit risk.



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Hypothesis:

Asset securitization always credit default risk.

Chapter 2

Literature Review:

Asset securitization always involves with the credit risk and finishes the credit risk. its will prove

in literature review by using the article of several researcher. Different researcher has different

and same view about the securitization, So we use of articles or researches of some researchers.

securitization is finish the credit risk by H. Erik (n.d.).Securitization is that who split the credit

risk into some several tranches, and manage that party are willing to repay the loan means that

securitization design the credit risk according to Borrower and borrower easily repay by H.

comptroller (1997).Garcia, Goossen, and Lamoot (2008) explained the Impressive improvement

and development in loan market for the usage of asset securitization over five years between

2002 to 2006.He conclude that if Borrower take loan on the one hand and on the other hand give

asset securitization than no chance of credit risk. Acharya, Schnabl, and Suarez. (2010) explored

that securitization is reduce the banking sector credit risk and transfer that risk to outsider

invester.

A study conduct by Wills and Sherris (2008) provide the technique that securitization is efficient

alternative of insurance risk to investor. He investigate that provide insurance risk meant

securitization provide the insurance on risk. In other word you will also call the securitization is

a insurance risk. you can say that insurance is another name of securitization. Giddy (2000) give

that how the securitization arises. When illiquid assets transfer in to security. Elul (2006) is a

economist showed that transfer illiquid asset in to tradable securities is assets securitization.

illiquid is a individual loan. Skara (2001) found that asset securitization a new unique use for

research and risk management purposes. Graff (2006) the concept of securitization thatsecuritization is effect on the asset value. He assume Demand curve on asset show negative

elasticity if securitization shows not effect on supply curve.

Nijskens and Wagner (2008) elaborate on credit risk with the help (altman, resti and sironi

2003). He considered that the first key and important part of the crisis is that credit risks.

Introduce the standard credit risk. on force three key variables Probiblity first half of default is



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securitization. Ahmed (1997) deduced some sense. The new Indonesian law and the legal view

on the financial asset securitization represent freshness. Dealing in securities in its broadest sense

of the three forms subsumes: First, the loans for securities substituting; second, loan

participations; and third, more complex technique of pooling, also known as pooling of these

comments focus on the pool of cash - flow - has spawned musical instruments.

Sabry and Okongwu (2009) is illustrate Securitization, The process of pooling assets in illiquid

securities markets, financial markets and in particular, has a significant impact on mortgage

markets. Securitization of the many benefits that borrowers, lenders and other investors the

opportunity to run it. Ashcraft and steindel (2008) explained the typically securitization

mortgage. The process of pooling assets in illiquid securities markets, financial markets and

especially the mortgage market has had a significant impact. Many benefits of this loan

securitization, lenders and other investors are being offered by the current. Made by three

reasons. First, securitization is an attempt to break apart all services provided by a bank in

separate services, which shall be applied by different parties. Given the current debate in the

scientific literature about what is the proper way to the bank of output measure, this seems a

good starting point. Secondly, we hope the reader that the services provided by the borrower of

the securitized loans are more than just maintenance convincing, and so the current treatment of

securitized loans in the National Accounts, which just uses the service fee income, is insufficient.

Finally, we use risk-adjusted reference rate as a senior tranch (MBS). (ABS) coupon rates for

customer loans, respectively, are inappropriate.

Boswell (2006) said that Securitization demonstrates one way to frame the issues, particularly

immigration, which, as we have seen, involves the filming of migration as an existential threat to

justify a particular type of public work . Elul (2011) is found with the help of Agarwal et al

(2011) See also Piskorski, Seru & Vig (2010), and Adelino et al (who dispute Piskorski et al).

Riskier originations securitized debt after the measures taken may also be due. Servicers are less

troubled loans in that they don `T may be encouraged to invest.

Jiangli, Pritsker and Raupach (2007) find that Securitisation risk management tool for banks, and

banks that use securitization reduced the risk of tail. The more highly leveraged capital structure

in the selection of equity finance and tax errors to avoid is allowing.alters is that securitization

provides insurance against credit defaults. Davidson and sanders (2009) is elaborate aboute the

securitization. Securitization securities that can be freely transferred in a single loan is the

process of change. Start securitization and investment functions to separate the functions.

Securitization of loans to investors without a single transfer of ownership through a very

complex process is required.

Raines And Wong (2002) give the concept on securitization. Securitization is the usual amounts

due have not fallen yet, but for many reasons, under the particular contract. Kothari (2002) give

the advantage of business securitizationThe main Benefits of entire business securitizations of



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unchanging & balanced charge security trustee for investors who works as a shield is.it would

have to oppose. Doherty And Schlesinger (2002) define Rapid securitization of risk transfer has

emerged as an alternative format.He also describes the process of securitization its insurance. In

insurance contracts, reinsurance product is also depend the ability of securitization.

Jobst (2007) briefly explain the Asset securitization. The securitization is a very important role in

his research. Transformation flexible structured liquidity and cost - efficient, risk transfer Asset

securitization represent, which is the current or future value of tradable debt maturity and the

difference between the Securities changed its claim to the property representation finance1

technology. Han and lai (1995) is analysis Industry.they insurance securitization in which the

prosess through securitization vehicles such as credit, loans, receivables, and cash flow from

leases of illiquid assets, claims, tradeable securities has changed. Cuchra and Jenkinson (2005) is

funded that Securitization is a financial institution established and important way for companies,

and pool their resources, as well as securitizations, the assets themselves, such as receivables,

mortgage loans or financial obligations to third parties as investors.In sold, but they may be cash

flow - or possibly generating businesses such as aircraft as fixed assets.

Jobst (2005) is represents Securitization structured finance transactions, where the receivables

portfolio of assets designated as cash flow contingent repayment claims are sold to the issuer bid

to increase liquidity position and business loans by expanding the capital base of support without

an increase. His research articles in (2006). Jobst has prove that Public sector institutions in

advanced countries, the successful securitization of the sovereigns Asset liability management in

emerging economies as a powerful tool in understanding the concept of securitization are

experienced. Maddaloni and peydro (2009) are examined the activity with the help of (Rajan,

2005). The impact of low (less risk) rates in the softening of the standards may be stronger in the

presence of high loans securitization activities.thay also extensive securitization. Securitization

endogenous to the economy, especially to the level of short rates, for robustness securitization

activities, we instrument with a time invariant indicator based on the legal framework for

securitization in each country.

Martin (2009) reviews the role of securitization in the credit market crisis. Credit or debt

securities are securities whose acquisition of the issuance of new debt securities by pooling a set

of credit. Ambrose, Little and sanders (2005) is deduced that Increase liquidity through asset

securitization creates value, reduce or re-assign the credit or interest rate risk, better influence

ratio to permission for the detection of earnings bookkeeping. Pagano and volpin (2010) is

widely agreed with the help of Different economist and researchers improve that about the

Securitization of mortgage loans in 2007-08 subprime lending crisis has played a major role.

Schwarcz (2003) Securitization is indisputable advantages. As required by the originator

disintermediation of banks, intermediaries, the ultimate source of funds, capital markets and



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remove the originator separate enable low-cost financing to obtain. This increasingly better

allocate the risks and liquidity commitment.

Telpner and taurig (2003) is funded That securitization is a financing tool. This creative,

Combining and recombining new forms, including the types of assets and securities. Assets,loans, receivables, etc. from multiple vendors with multiple obligors, and many times, are

collected and repackaged, sign, or other asset-backed securities sold in the form. assets provide

the financing for Securitizations sellers.Gadkari, agrawal, sethia an damale (2010) is defined his

research that Securitisation process where the underlying pool of assets to be organized and

investor (s) from the sale of financial instruments directly or through a special purpose vehicle

(SPV).

Duff (1999) deduced International future flow securitizations are Create broadly defined as debt

offerings A foreign originator (non-US) sponsored by And secured by receivables due from the

designated International obligors. Future receivables Usually are sold directly or indirectly Home

to a foreign trust by the company Release or other vehicle, which issues a debt instrument in

turn. Jr., kunt and kane (2008) Defined about the securitization how to sell a direct loan

securitization, a provider that can offer customers Buyers also a number of useful and monitor

their position made it easy to reverse later. First loss position in the asset pool and maintain

securities overcollateralizing is issued, lenders selected investor concerns about credit quality

may improve Claimed back.

Mcdonald and warwick (2008). Securitization framework in three main senses of doubt is tight.

First, the Act narrowly to build security into a dominant actor, usually with a focus on addressing

political leaders have described. Second, the Act only in the context of narrowly defined

interventions with a focus on the time it is. It has been suggested that the security risk and only

risk is represented by the material. Such a framework, a conceptualisation of security politics as

inherently negative and reactionary, is encouraged. Gan and Mayer (2006)The creation of the

securitization (and previously unexplored) Organizational expenses Separation of ownership and

control of assets and equity associated with parsing Relatively thin, ownership interests in a

number of tranches. He also explained that with securitization, Management takes responsibility

for a third party (special servicer) troubled debt. Schwacz (1995) in many cases, securitization,

an originator `s direct financing costs but also provides important indirect benefits. Securitization

is the real cost, however, and therefore the only alternative sources of funding should be used

after the competition.

Chapter 3

Methodology:



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Methodology depend on series of choices, For example what information and data to meet, how

to evaluate the information and data that you crease. Methodology of this research topic (credit

risk and securitization) is explanatory. Asset securitization is dependent variables and credit risk

is independent variables.

How to take done the research?

With the usage of theoretical process we did the research.

How to collection the Data?

We take the data from different resources, prior research, online journals, websites and

researches of different economist. Different researcher has different views about the

securitization and credit risk.

Explained variables

Credit risk The risk that borrower Failure to repay the loan.

Securitization Securitization is key that finish the credit risk securitization play

imported role in bank sector.

What is my main focus?

Now, we discuss that in prior years transaction of CLOs of different Eurpeon Banks from 1997s

to 2004s. What is the role take a assets securitization activity in different bank and also that

which have not a securitization activity. Our analyses CLO transactions of the European banks

from 1997s to 2004s.

What is my theoretical approach?

Our theoretical approach is a step in the first two fold. the, we have a bank loan securitization

and securitization that banks are not subject to loan. In analysis, we examine the properties of the

bank into state bank. Various sources of information, whether or not we have every year in our

data set to test the simultaneous consideration of the assets of the bank is protected. Whenever

the bank by In any case one of the securitization operation, the dependent variable in regression

1, we will take, otherwise, if there is no securitization movement, i.e, it takes on the rate of 0.

Contained by Ltd dependent variable model, we have a binary dependent variable to the

specified requirements, where the possibility of observe a specified cost by the alternative is

designed to handle in this financial entities, brief view of securitization activities.

Freq. of CLO created by sample banks,

N = Shows the No. of banks who is issue CLO-transaction.



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Please note that our annual sample of European banks in the securitization decision.

They prefer to securitize their loans just once, while others determined to continue to

Protect Your Assets. This experimental approach allows us to account for the value of the

cluster.

The following is a general method based on the Huber-white bank error.

Descriptive statistics:

In our sample for Descriptive statistics for banks during 1997 to 2004. Calculated

is base on complete sample of 1948 banks.

Show general statistics about the sequence of firm specific Explanatory variable, and glimpse.

From the figures, it could see that In particular, we are a very heterogeneous sample of banks

with information about their risk of features, In particular, the performance of their equity capital

and related holdings.18 Tier 1 capital that banks are too many different types of businesses

indicate that We have to consider different types of banks - the strategy Stemming - Of course.



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In addition, wearing appropriate to switch to the new regulatory capital byasela aikyamatyate I

Byasela aikyamatyate second request, that our sample is not coincidentally, also led Tier 1

capital for the relatively heterogeneous observations. We can not assume Switching time to

correct our information, only we can hypothesize that large banks tended to The Bank Holdings

to change their regulatory capital compared to the relatively early. Data The total sample size of

the property in respect of a large mirror roughness. The same stock - listed on the Bank as

additional information that could seen from Volatility, great marketplace to reserve value

percentage, & beta ranges. Financial information of the regressors of parallel import Cycle. GDP

- the value of the growth rate is very obvious to a large extent, Country-specific interest rate and

stock market indeces. Index and a crash Interest rate improving in different countries could

establish in preface Table. Different financial institutions that focus on the future of our sample

are Business models and different levels of economic performance and (countryspecific)

observed in the Business - cycle.

Chapter 4

Analysis:

The 1st stride in my investigation, we did not get banks to securitize loans and CLOs, and the

issue does not feature in two of the total sample of differences in-means test. The univariate

experiment outcome is given in Table. It is No. of observations in all cluster, mean & standard

difference of the competent. Already seen, the inspection is the smallest No. of tier 1 capital to

the experiment. The last column of Table, the two subsamples' means a analysis on the sameness

of P - values are available. Significant results for both firm-specific variables and the outcome of

the smell. It is the only firm-specific regresses in the share of equity and equity returns that can

not differentiate between the two subsamples. We believe that the only country in the guise of a

specific variable index does not yield a significant role. Univariate results of securitizing loans to

financial institutions that we lowly - performing, low-capital ratio, a lower-quality, high liquidity

and low risk with large organizations that purport to be. In addition, they are investments -

banking activities that generate fee income may be more strongly engaged. Macroeconomic the

variables, we observe that the set of a credit default & credit downgrades (through a high risk of

credit & create less misuse), high-risk, less GDP development velocity & the interest rate that

will be useful for securitization.

Univariate experiment of difference in firm-specific & macroeconomic characteristics

- All banks



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For example, a table (in preface) show, the proportion of firms usage securitization against

Those that did not grow up in year. The model variable accounts for major difference between

the financial institutions and non-securitizing securitizing. Especially France, Great Britain and

Spain in the sub-group in which a significant difference. In addition, we have that lots of

marketable banks are extra likely to decide the time of securitization Housing is probably less

than most banks. joint through the information that the securitizing bank Payment by:extensively high payment earnings, a striking conclusion of the first accumulation of points

CLOs, commercial banks may be trying to (indirectly) investment to increase their stake Their

traditional business of the new equipment (securitization), the use of banking Bank loan.



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This table provides the outcome of the univariate investigation Stock - listed in the bank sub-

sample. Although the results are similar 15 Compound word, a small firm-specific regressesguide to special conclusion reserve - the use of securitization of financial institutions have a

advanced marketplace to book ratio & linked agencies for non-beta, a low-capital percentage, a

high rate of income - the proportion of how much, Lower liquidity than firms that are not used

for CLOs and only a small total assets. Overall, the stock - listed firms, securitizing & non-

securitizing the distinction among Financial institutions are greatly smaller than the totality

sample. In exacting, the risk characteristics of The bank is the difference among the two groups

did not drive. Amazingly, The reserve - which accounts for the return of volatility is not a major

difference. In this respect, our The outcome differ from Minton et al. (2004), who is that firms

issuing significantly Low stock surplus stability.

Recommendation:

Due to shortage of time. I could not adding a more research but in shortage of time I could done

my work much perfectively of about the credit risk and securitization. Another limitation in my

work was that data could not be searched within the sites of Pakistan because the data was not

available in the banks of Pakistan and I had to find it from the sites of European countries.



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Chapter 5

Conclusion:

Based on recent research on the market for credit risk transfer, these studies examine firm

specific And a hint of financial institutions' decision to lead the drive Loan securitization

transactions. Although we cannot reject the hypotheses of the bank loan, you can use

Securitization to saving on regulatory capital, that key driving factors of the banks. Volume of

the bank's decisions on securitization, credit risk, liquidity and performance. Especially Large

bank default risk securitization connections to reduce exposure to guide & raise liquidity. Yet the

risks - and the transfer of financial power is limited to: organizations Loan securitization is an

important turning point in the liquidity of the lowest decile does not show; The highest decile of

credit risk for companies, and even back to the variable effects. As a conclusion we do not thinkthat what the state of the market for credit risk transfer can be.The second is that there is no

regulatory framework for new byasela aikyamatyate will be hampered by Capital arbitrage.

Rather, it is mainly an economic securitization of loans that are engineering equipment, reducing

costs of financial suffering linked to bank loans. It Respect, the move of credit risk may be useful

in the process of disintermediation traditionally, banks based in the European financial system.

In particular, commercial Access to opportunities to market-based banking operations - the bank

- and seize and possibly their risk - through a desire to increase the expected return to the feed

CLO transactions.



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References:

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Credit Risks and Securitizattion

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