Securitization And Scale Expansion Of Social Loans: Mechanisms, Consequences And Solutions

In this paper, the asset securitization innovative financial instruments are set forth to study the impact of management of commercial banks, as well as commercial banks played an important role in the asset securitization process. Especially for commercial banks in the capital adequacy ratio constraints, commercial banks repeatedly use asset securitization to get regulatory capital arbitrage and create new loans. Focused on the irrational consequences of the loans expansion mechanism and the detailed derivation and discussion, we try to find a solution to this problem some of the listed methods and recommendations. Through asset securitization, credit risk of commercial banks transfer to the other market participants, thereby reducing the Risk-based capital of bank capital preparation. Despite they increased bank's capital adequacy ratio levels, but the transferred risk would be out of control if given the unsupervised market participants. In the economy, for only a small amount of capital to cover the corresponding risk, coupled with the irrational expansion of the size of loans, capital adequacy ratio of the whole society is reduced to not meet the corresponding risks. Once the systemic financial risks accumulated to exceed the maximum level that the whole of society can bear, the outbreak of the crisis will be inevitable. The danger will start from the weak links, forming a chain reaction spread to every corner of the financial system and the entire financial system will collapse and eventually led economic crisis. That was well testified by the global financial crisis by sub-prime mortgage crisis of the U.S.Most of people use the credit-cycle theory in existing literature, focusing on the macro-level Analysis of the causes of the sub-prime mortgage crisis. From an innovative way this paper mainly explores the reasons at the micro level, not only analysis the general process of asset securitization, but also drawn a more detailed understanding of the related-party transactions between the first market and secondary market. We find the role of commercial banks, which are the whole key to the process of asset securitization. More importantly, in the minimum capital adequacy ratio constraints, we analysis commercial banks how to make social loans scale expansion and find the appropriate solution.