Banks' securitization indicator

• Main Authors: Zakaria, Roza Hazli, Ismail, Abdul Ghafar
• Format: Article
• Published: EuroJournals 2009
• Subjects: HG Finance; Banking
• Online Access: http://eprints.um.edu.my/25152/; http://www.internationalresearchjournaloffinanceandeconomics.com/ISSUES/irjfe_24_19.pdf
• Institution: Universiti Malaya

This paper proposes an alternative measure to quantify banks' off-balance sheet securitization activity. We argue that the conventional method of simply taking the notional value of each securitization instrument to represent banks' securitization activity provides bias estimates since it ignores other factors such differing bank sizes and the variety aspect of securitization, while using dummy failed to gauge the extent of banks' involvement in securitization. Hence, our proposed indicator is novel in the sense that it takes two aspects of securitization into accounts; which is the amount of securitization activities as well as the different combinations of instruments that constitute banks' securitization activity. Besides, measure to prevent biases from banks' size is also taken into account. Application to the Malaysian setting demonstrates that the indicator is able to distinguish between active and passive players and it provides significantly different measure as opposed to the conventional methods. At the same time, the indicators and its relationship with banks' performance variables are consistent with theoretical prediction. © EuroJournals Publishing, Inc. 2009.