Residential Mortgage Loan Asset-backed Securities On Bank Earnings And The Risk Of Impact

The object of this paper is to analyze the benefits and risk management from theangel of issuers. The benefit to the issuers mainly conclude monetary benefit (reducefinancial cost and increase net income and return on equity) and nonmonetary benefit(thecapital to asset ratio and capital structure management). While the three basic types ofrisk MBS issuers face are namely reinvestment risk, cash flow mismatch between themortgage pool and the MBS, and the potential loss of subordinate MBS. The paper firstmake quantitative analyses of the cost, profit margin and static cash flow yield from thesupport assets the issuers hold;then make a qualitative analysis of the risks to the issuers.Then forward on to a case study to support the view points above. From this we canconclude that MBS improve the income structure,increase yield, and contribute tobanking asset management and risk management and so on. Thus MBS will be thenecessary trend for banking business and will experience rapid development in the future.