Shadow Banking Credit Intermediation: Determinants Of Default Risks In Securitization And Collateralization

by Assoc. Prof Dr. Mohd Yaziz Mohd Isa and Prof. Datuk Seri Dr. Md. Zabid Haji Abdul Rashid

Journal of Modern Accounting and Auditing, (2014) Vol. 10, No. 11, Pages 1119-1129

Abstract

Abstract

The growth in shadow banking system over the past few years is acknowledged as the key risk to Malaysia’s financial stability. This is because that it is associated with growth in the household debts extended by the shadow banks.

In line with initiatives by the Bank Negara Malaysia (the Central Bank of Malaysia) to enhance surveillance on the activities of the shadow banks in Malaysia, this study attempts to examine the determinants of default risks of shadow banks restricting to focus on their two main activities: securitization and collateralization.

The results provide empirical evidence that future methodology to examine the systemic risks in the shadow banking system may need to account for additional explanatory variables that measure collateralized assets that are being intermediated.

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