Securitization: An International Perspective

Article excerpt

THIS PUBLICATION, PUBLISHED BY THE Organization for Economic Cooperation and Development (OECD), is likely to be of interest to those active or interested in the applications of securitization outside the United States. Though Thompson's focus is principally on the OECD countries, some of the analytical comments and observations may apply elsewhere as well. Written from the perspective of a regulator (the author is a former employee of the Federal Reserve Bank of New York, who has been working in Paris with the OECD for a number of years), the book traces the development of securitization from its roots in the United States to 18 other OECD countries, some more receptive to the new technology than others.

The book is noteworthy in many respects. It provides an authoritative, if general, comparative perspective on the dissemination of one of the most important financial innovations of the last two decades. It documents and proposes reasons for the slower acceptance of securitization in countries other than the United States. It examines official policies toward securitization as one of the variables that has influenced the pace of dissemination of this new financial technology. Other than the rating agencies, there are few similar sources of comparative analysis of the international securitization markets. And unlike the rating agencies, Thompson takes a broader policy perspective, raising some interesting issues on inconsistent regulations, for example, regarding the risk rating of investments by banks in mortgage-backed securities.

In detailing the international dissemination of this new technology, the author places off-balance sheet financing via securitization in a proper perspective by contrasting it with various similar on-balance sheet forms of lending, especially in the housing and the municipal sectors, which have been particularly successful in Germany and Denmark. Though the volume of securitized financing in the U.S. MBS and ABS markets is quite staggeringamounting now to some $2 trillionthe traditional sources of on-balance sheet financing are not insignificant. On-balance sheet mortgage bonds (e.g., pfandbriefe in Germany) and communal bonds and other similar issues that seem broadly comparable to modern, off-balance sheet ABS/MBS total some $1 trillion. In countries where such traditional financing techniques have been well established, it is not surprising that off-balance sheet securitization has not made great inroads.

The pace of development of securitized products outside the United States has been slow. CapMAC estimates the volume of non-U.S. securitizations (in Europe, Australia and Asia) during the last decade at some $90 billion. …