Analysis/Discussion on What Role Did Securitization Play in the 2008 Financial Crisis?

        By analyzing the role of securitization in the financial crisis of 2008 it is evaluate that on bank behavior there are a lot of negative impact of securitization because in the markets it results in increased transparency. Some of the banks need to hold asset-backed securities capital, they have to take liability on their risk and investors are needed to perform outstanding diligence. However, given the stagnation of the current market, the framework of the securitisation has been revising constantly to revitalize the marketplace . Now on January 1, 2019, it can be seen that the new securitisation regulatory framework of the Europe’s will approach into effect. In particular, this framework also aspires to encourage the issuance of transparent, simple and consistent securitisations that are effortless to monitor and evaluate by regulators and investors similarly. For instance, fundamental assets must be “consistent” by category (having alike characteristics cash flow and its risk) and the maturity. The framework is likely to provide resources liberation for investors who aspire to hold these transparent, simple and consistent securitisations. All of the agencies also made alike mistake in score structured debt goods whose worth was attached to the mortgages, for example obligations of the collateralized debt, or the CDOs. The rating agencies appear at current inclination in lodging and sure to resolve worst-case examination on a 10 percent turn down in the housing market .

        So it can also be said that there are some still some of the shortcomings. The capital relief compensation is not appropriate to investors long-term institutional for example insurance companies and pension funds. The countries will be agreed the self-sufficiency to inflict authorize on non-compliance with the measures of the risk liability. This might potentially temper cross-border movement [3]. In spite of all of these limitations, new structure is anticipated to expand opportunities of the investment for continuing investors. The European Union also expects it will increase to household and businesses market through €150 billion to actual economy. With a lack of confirmation to support with bad impact of the securitization, it’s important to tread cautiously and learn from the entire financial crisis of 2008.