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Does Mortgage backed securities reduce bank risks, Evidence from European Market - Essay Example

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It should be noted that 36 of these originators are synthetic while 19 represent true-sale. The characteristics of the originators that…
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Does Mortgage backed securities reduce bank risks, Evidence from European Market
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Does Mortgage backed securities reduce bank risks, Evidence from European Market

Download file to see previous pages... Using these variables, a total of 55 transactions are recorded with 36 being synthetic and the rest true-sale transactions. For clarity reason, all transactions that do not have any of the originators whose data are presented in this report are excluded: this is important because it would be difficult to determine the level of risk transfer involved in these transactions.
Some relevant data for this report are obtained from Securitisation Data Report of the European Securitisation Forum covering the four quarters from 2005 to 2009. This provides a wealth of references among some European Countries including the major Euro Block financial markets like the United Kingdom, Germany, France and the Italy. The comparative prices of MBS in some of these countries are also presented in the report.
It will be helpful to, first of all, provide brief descriptions of the European banks covered by this report before elaborating on the analysis of the strategic risks these originators are involved in during MBS-transactions. My sample period is from 2005 to 2009; their transaction information is obtained from the reports produced by the rating agencies as well as intra-bank transactional updates.
The European banks whose transactions are presented in this report are moderately large in size with total assets averaging 102 bn Euro, while the standard deviation stands considerably at 78 within a significant range differential from 0.236 to 1.262. Of special interest is their average operating income (profit) which is 615 m Euro, with a standard deviation of 1178 showing an impressive range from a negative value (-2.2.46 to huge positive value (17, 542). Although it is possible that some of the originators investigated in this report may have reported some losses during the entire sample periods; however, the emphasis here is that appreciable amount of profits are recorded during the MBS-transactions detailed here. Based on the average value, these ...Download file to see next pagesRead More
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