Securitisation in BRICS: Issues, Challenges and Prospects

Franklin Ngwu Vincenzo Bavoso and Zheyang Chen

Abstract

While there is no doubt that securitisation contributed to the 2007-9 global financial crisis

(GFC), it remains a very viable and flexible refinancing tool especially for developing and

emerging markets. Focusing on the BRICS (Brazil, Russia, India, China and South Africa),

this paper examinesd the issues, challenges and prospects of securitisation in these

economies. Although the challenges such as the need for more robust and effective

regulation, limited size and development of their financial markets, remain, we argue that

securitisation should be properly explored and utilised to address the funding gaps in

developing and emerging markets. Possibly learning from the experiences of the BRICS

during the GFC, the BRICS seem to be developing a more prudential and strident regulation

of their securitisation markets. If this is properly applied, such as the increased Minimum

Risk Requirement (MMR), securitisation might turn to be a tool not only for refinancing but

also a key one for the development and expansion of their financial markets.

1

1.1 Introduction

Since the global financial crisis (GFC) 2007-09, the global securitisation markets have

experienced a downturn not only in developed economies such as USA and UK but also

even in emerging markets that were witnessing an evolving trend in with evolving

securitisation practice markets (IOSCO, 2012). Although securitisation has been

identified as a key trigger of the GFC (Turner, 2009), it is still a valuable financing

technique if properly regulated and utilised. It started in the BRICS countries (Brazil,

Russia, India, China and South Africa) from about 2004 but was largely stopped or

temporary halted during to the GFC. With the perceived end of the GFC, securitisation

was restarted across the BRICS but has not witnessed a reasonable growth or utilisation

as was the case in developed economies before the GFC. Nevertheless, given their high

development financing needs, securitisation provides a huge financing opportunity yet

to be properly utilised. As securitisation has remained limitedly utilised in these

emerging economies (with the exception of China) – and to a certain extent in

continental Europe too - even withdespite their inherent financing needs (except

Cchina), a critical examination of the issues, challenges and prospects of securitisation in

these economies is pertinent. It needs to be clarified that even outside BRICS,

securitisation has remained moribund in many developed financial markets. Much of the

post-2008 securitisation activity in the US for instance is due to public subsidies and the

situation is even more alarming in the EU. Restarting the securitisation market (and

more broadly capital market-based funding channels) is in fact at the heart of recent EU

policy initiatives (EU Commission 2015). The stagnation is said to depend on a number

of reasons chiefly identified with investors’ stigma, and with the perceived stiffness of

post-crisis regulation (in particular the regulatory capital regime in force since January

2014, which brought changes to the risk retention rules, see Directive 2013/36/EU

CRDIV).

This paper has two aims. First is to draw from the securitisation experience in

developed economies to critically evaluate the challenges of using securitisation in

BRICS countries. Second is to provide suggestions on how a better securitiszation

2

market can be created in the BRICS and other developing economies through effective

regulation. The remaining parts of the paper will proceed as follows: In addition to

providing an overview of the rationale and development of securitisation, section two

will examine the benefits and drawbacks of securitisation. In section three, the

development and state of the securitisation market in each of the BRICS countries is

examined. Section four analyses the challenges of creating and sustaining a well-

functioning securitiszation market in the BRICS countries. It will mainly focus on the

problem of how the regulators determine a proper percentage or approach for the

minimum risk retention (MRR) requirement and how the limited size and development

of the financial sector of the BRICS might constrain their securitisation market . Section

five examines the prospects of the securitisation in BRICS countries by drawing on the

experiences in USA and UK. With a critical examination of the risks and benefits, it will

analyse the possibilities for securitisation market to succeed notwithstanding even with

the challenges emerged in the aftermath of the GFC. Section six is the conclusion.

1.2 The Rationale and Development of Securitisation

To complete

In the years preceding the GFC securitisation activities grew enormously, both among

corporations and government entities which, had traditionally sought ways to minimise

funding and liquidity problems, and more topically among financial institutions. For

these entities securitisation became an essential tool to optimise the outlook of their

balance sheet and in particular to manage their regulatory capital. This was largely a

consequence of the capital adequacy regulation under the Basel Accords (I and II) which

prompted banks to manage the process of risk accumulation by inter alia engaging in the

originate-and-distribute model (Arner 2009). By moving assets off-balance sheet, banks

could originate more loans while at the same time comply with the Basel requirement to

hold capital against risk. This model proved to be particularly successful because the

3

securitised bonds marketed and sold by financial institutions were considered highly

safe investments (due also to triple-A ratings provided by credit rating agencies) and

attracted therefore the appetite of different types of institutional investors. These

included other banks and financial institutions active in the wholesale market for

funding purposes.

Securitisation traditionally also encompassed the function of turning illiquid assets

(such as loans or mortgages) into liquid securities (tradeable bonds). This in turns

contributes to deeper, more liquid and diversified financial markets (Criado and Van

Rixtel 2008). From originators’ perspective, securitisation has represented a cheaper

and more direct financing channel than traditional bank lending (due to the direct access

to the ultimate source of finance, the capital markets, without the intermediation of

banks). It has also been more efficient than corporate bonds, because securitised bonds

tend to be secured over a pool of specific assets and therefore receive a higher credit

rating.

The accounting advantages associated with off-balance sheet techniques came to

prominence in unsuspected times, with the wave of corporate scandals between 2001

and 2003. Thanks to securitisation, originators improve their balance sheet because they

can originate more assets and move the relating liabilities off-balance sheet, optimising

therefore their gearing ratio (at least its appearance) and, as already explainedsaid, the

regulatory capital.

In the pre-crisis years the securitisation of mortgages, car loans, credit card

receivables and other forms of consumer credit allowed a greater access to finance to a

number of social groups. On the face of it, this seemed to represent a means to reduce

inequality and to increase social mobility, a function that is particularly important in the

context of emerging economies. Generally speaking, financial development and financial

innovation were considered before 2008 by most mainstream economists to be

conducive to economic growth. This was so because Anglo-American-type deep and

liquid financial markets were seen as the benchmark of economic development and a

diversified financial system was thought to be vital for successful infrastructure projects.

4

This paradigm however has been strongly revisited after 2008 and already as early as

2005 IMF economist Raghuram Rajan raised red flags on the possible dangers of the

global financial system, increasingly characterised by long and opaque chains of

intermediations and by intermediaries with high-risk appetite (Rajan 2005). It has also

been observed by Turner that securitisation, as a process of credit creation, can be the

cause of asset bubbles, because it creates – especially in conjunctionconnection with low

interest rate policies – an elastic supply of money. This however is countered by an

inelastic supply of goods, which is particularly true with respect to real estate and

housing (Turner 2015). This line of critique is consistent with recent studies that have

demonstrated that credit creation and increasing levels of debt in the financial system

are not always conducive to financial development and economic growth. This is so

because there is little feedback from credit growth to real economy expenditures, which

in other words implies a situation of growth-less credit boom (BIS 2015). Hence the

development of asset bubbles, which lead in turn to more inequality and restricted

access to some essential goods, most prominently housing (in this sense Picketty 2014,

ch.2).

When discussing the possible advantages of a well-functioning securitisation

market, it is worth looking at the functions identified by the EU Commission in its recent

proposal for the regulation of Simple Transparent and Standardised Securitisation (EU

Commission Proposal 2015). The Commission in particular identified four functions of

the transaction, namely 1) the investment function that allows investing in long-term

maturity assets without having to hold them on the books; 2) the funding tool that

supports real economy activities by alleviating the maturity mismatch of assets and

liabilities; 3) the market-based risk transfer mechanism that disenfranchises banks from

the business cycle; 4) the process that generates high-quality collateral that is necessary

to support other transactions (EU Commission Proposal 2015).

As already announced earlier in the article, the market-based intermediation chain

based on securitisation has been singled out as one of the major causes of the GFC. In

particular, Turner highlighted the problems associated with financial innovation (Turner

5

2009) and the resulting transformation of simple securitisation structures into much

more complex and opaque transactions, such as synthetic CDOs or CDO squared, which

combined the traditional features of securitisation with the application of derivatives

(Bavoso 2013).

It is worth reconceptualising in this section the potential pitfalls of securitisation,

together with the intrinsic problems that more innovated transactions present. This may

be particularly useful in the context of emerging economies, where transactional

developments have not yet occurred on a large scale and securitisation can realistically

be envisaged as a tool for social and economic growth.

Firstly, it is often observed that the sale of receivables off-balance sheet (and further

down to investors) resulted in originators’ disincentive to adequately monitor the

quality of the originated assets (Caprio, Demirguc-Kunt, Kane 2008, p.12). With the

increased demand for securitised products in the pre-crisis years, originators had little

incentives to conduct due diligence on the underlying assets. Financial institutions in

particular started purchasing large volumes of existing debt securities (therefore not

contributing to the creation of real economic value) and book immediate profits by

repackaging and selling them to investors, remaining in the meantime unconcerned

about the quality of the underlying debts. This process (originate-to-distribute)

contributed to the erosion of monitoring and underwriting standards in capital markets,

and large banks in particular were chiefly concerned on structuring transactions in

order to obtain triple-A ratings. This problem of incentives is now partly countered by

the application of a 5% “skin in the game” (a minimum risk retention for originators,

imposed both across the EU and in the US – more on this will be said later in the article).

Another critical feature of securitisation (and in particular of its more innovated

forms) is the level of leverage it creates. While this is often a “hidden” leverage, because

debts are transferred off-balance sheet, in synthetic transactions due to the absence of a

true sale, the exposure to securitised assets is much greater (De Vries Robbe, Ali 2006,

p.13).

The above problems resulted in the overall mispricing of credit for two further

6

reasons. Firstly, securitisation became in the pre-crisis years increasingly characterised

by the complexity of the products that were sold to investors. This was caused by the

way in which assets were repackaged, with pools comprising heterogeneous assets

which could not be accurately valued by CRAs (Schwarcz 2009). Secondly, as

securitisation structures evolved, legal relationships within them became more complex.

This allowed among other things sophisticated investors and transaction sponsors to

manipulate the pricing of collateral, by virtue of their inside knowledge. Complex

transaction chains also highlighted conflicts of interest that led to perverse incentives to

destroy firms’ value in order to speculate on short positions (something that became

easier with the application of CDSs, epitomised in the Goldman Sachs Abacus CDO. See

Bavoso 2017).

Lastly, it needs to be pointed out that the development of more complex transactions

– particularly the synthetic ones – emphasised the above problems, because the

employment of derivatives was designed to replicate the performance of particular asset

pools, increasing the level of leverage and risk-taking in the financial sector, without at

the same time contributing to any real economic growth, ( such as access to the housing

market for instance). It is also worth noting that while structured products were used to

spread and diversifyied risks (one of the announced functions of securitisation), their

application resulted instead in the same risks being magnified and spread across the

financial system in an uncontrolled fashion. On the one hand, the process proved to be

particularly detrimental for less sophisticated investors at the end of the transaction

chain (such as commercial banks) because they could not adequately appreciate the

riskiness of the products they were buying. On the other hand, credit enhancement

mechanisms, particularly guarantees, nullified the transfer of risk because in cases of

SPV’s insufficient cash-flow, originators would pay off investors’ claims (Acharya,

Schnabl, Suarez 2013, p.521). This mechanism – together with the application of CDS –

increased the interconnectedness of the financial system, its interplay with the shadow

banking system and the general level of systemic risk (see Bavoso 2016).

Some of the risks and pitfalls associated with securitisation are probably the result

7

of the way in which large and sophisticated financial markets – primarily in the US and

the UK – have evolved during the last twenty years. The growth of debt capital markets

in particular and the speed of financial innovation that took place within them brought

about drastic changes in the dynamics of credit intermediations and in the prevailing

business models of the large financial institutions that emerged from the deregulation

process (Jaffer, Morris, Sawbridge and Vines 2014). Securitisation in particular allowed

large financial institutions to originate large volumes of assets of dubious quality and

sell them to investors in the capital markets. Much of the credit intermediation that

underscored this process did not respond to any economic or social rationale but merely

to arbitrage or speculation. It is vital that any degree of financial development

undertaken by BRICS economies takes under due considerations the lessons that can be

learned from more sophisticated markets. …

1.3 Securitisation Profiles in BRICS

Brazil

In Brazil, according to the Basel Committee on Banking Supervision (BCBS, 2013a), the

securitisation market is small due to a number of factors such as high interest rates, high

interest spread, structural and legal constraints. In addition, the comfortable capital

ratios that Brazilian banks faced also possibly made them to have less incentive to

securitise (BCBS, 2013a).

8

As for the regulation, the method of credit ratings is not applied in the Brazilian

securitisation regulatory framework (BCBS, 2013a). Instead, the framework mainly

applies a combination of ‘look through approach’ for senior tranche and a ‘risk-

weighting approach of 1250%’ for all subordinated tranches (either mezzanine tranche

or junior tranche), regardless of the credit ratings (BCBS, 2013a). A significant reform in

the Brazilian securitisation regulation (see figure 1.2 below) took place on 1 Jan 2012

with new regulations to encourage a material risk transfer to the investors through the

mezzanine tranche, which was the equity tranche in the past securitisation transactions

(Moody’s Investors Service, 2012a).

In the new transaction structures, the equity tranche is expected to decrease to 5% from

20% and the gap of 15% will be filled by mezzanine tranche (Moody’s Investors Service,

2012a). Consequently, with only 5% or even less protection, the new mezzanines will be

riskier than the previous mezzanines which are backed by a great amount of equity

position (Moody’s Investors Service, 2012a). In summary, the requirements of risk

retention for the securitisation have been significantly reduced and thereby the risk

9

exposures that investors faced have increased accordingly.

In the second half of 2012, the Brazilian regulators issued a modification of the

regulatory framework on asset-backed securities (ABS) that aims to eliminate the

structural residual risk exposure of the sellers of securitised assets, and therefore the

modification will lead investors to be most unlikely to suffer the losses due to the default

of sellers of securitisation products. To be more specific, firstly, the fund of securitisation

will be possessed by the Special Purpose Vehicle (SPV) or a third-party bank’s escrow

account instead of holding by the sellers in their own account. In addition, broadening

the master servicer’s role in terms of verifying, checking and monitoring loans as well as

safeguarding original loan files (Moody’s Investors Service, 2012b). Besides, the reform

of increasing assets safeguards and strengthening transaction governance are also stated

in this modification, and the Brazilian regulator was likely to enact the modification in

2013 (Moody’s Investors Service, 2012b).

Russia

In Russia, as Aris (2012) pointed out, the securitisation market was restarted in 2012, as

several banks announced their plans for a securitisation programme for the first time

since the 2008 international debt crisis. This resulted from the sharp growth in the

Russian mortgage market in 2011 and the consequent anticipation of a great increase in

mortgage lending by 2012, which was expected to reach a record high (Aris, 2012).

However, the rise in mortgage-backed securities (MBS) did not address the challenges of

meeting the 10% total capital ratio requirement following the adoption of Basel III

regulation in Russia (Euroweek, 2013). As MBS was the only type of securitisation

permitted in Russia until 1st July of 2014, the demand to allow other asset-backed

securitisations was quite strong in the Russia. This was due to the requirements of the

adopted Basel III accord which required Russian banks to hold more capital and as a

consequence, a possible lower return on equity for their shareholders (Euroweek, 2013).

In early 2014, the Russian Parliament issued several reforms that allowed banks to

engage in securitisation using other asset-backed securities (ABS) from 1st July 2014

(IFIR, 2014).

10

According to PWC Russia (2013), this Russian ABS Law is the reformed version of

Russian Legislative Acts on Regulating Securitisation which seeks to create a legal

framework and condition for securitisation of a wider range of financial assets -not only

mortgages. With respect to the key changes in this reform, first of all, the new legal

framework establishes a simplified procedure on the bankruptcy legislation to the

Special Purpose Vehicle (SPV) that the bankruptcy claims can protect the interests of the

holder of securitisation products and guarantee that their claims will be satisfied via

enforcement of the collaterals in respective securitisation deals (PWC Russia, 2013).

Furthermore, this regulatory framework sets up requirements of risk acceptance in a

securitisation deal for the originators (PWC Russia, 2013). Under the new law, the

originators - usually banks - are required to keep 20% of total obligations of the

collateralised bonds and 10% for infrastructural projects (PWC Russia, 2013; Financier

worldwide, 2014). These changes are intended to raise the responsibility of originator

banks and ensure higher protection for the securitisation investors (PWC Russia, 2013).

In addition, as Financier worldwide (2014) mentioned, the reform of the new ABS law

will also need several necessary steps from the Russian Central Bank to make it fully

implemented and effective from 1st July of 2014. Nonetheless, it represents a significant

improvement in the Russian securitisation market as well as the regulation of the

securitisation.

India

In contrast to Russia, according to ICRA (2012), the securitisation market in India was

not stopped owing to the financial crisis, whereas it represented a continued decline

from FY2008 (Financial Year 2008, i.e. 01 Apr 2007-31 March 2008) to FY2011. The

trading value of securitisation in FY2011 was around 318 billion Indian Rupee (worth

6.36b US dollar), which was about half of the trading value in FY2008. In FY2012, the

Indian securitisation market started to revive with a 32% growth in the issuance volume

and a 15% increase in trading value in comparison with FY2011. Until 2012, Asset-

Backed Securities (ABS), Residential Mortgage-Backed Securities (RMBS) and loan sell-

off (LSO) were the three major types of securitisation programs in India. The ABS

11

dominated with 71% share of the total value of the securitisation market in FY2012. It

was followed by RMBS and LSO for 23% and 6% respectively (ICRA, 2012).

With respect to the regulation of securitisation in India, according to Reserveverse

Bank of India(2012), apart from the common regulatory rules of assets eligibility, loan

origination standards and disclosures by the originating banks, there are also three

significant rules in the India’s securitisation framework, which are Minimum Holding

Period, Minimum Risk Retention (MRR) and Limit on Total Retained Exposures.

Specifically, the rule of Minimum Holding Period is intended to ensure originating banks

have held each loan for certain required periods before they securitise it in the

securitisation transaction. The minimum required holding period can be seen in table

1.3 in below:

Minimum number of instalmentsto be paid before securitisation

Repayment frequency – Weekly

Repayment frequency – Fortnightly

Repayment frequency – Monthly

Repayment frequency – Quarterly

Loans with original maturity up to 2 years

Twelve Six Three Two

Loans with original maturity of more than 2 years and up to 5 years

Eighteen Nine Six Three

Loans with original maturity of more than 5 years

- - Twelve Four

Table 1.3 (Source: Reverse Bank of India – India’s Central Bank, 2012, p.3)

Furthermore, the rule of MRR requires that originating banks need to hold certain

percentages of the securitised asset based on the type of underlying assets of the

securitisation, where 5% risk retention for the loans with original maturity of 2 years or

less, and 10% for bullet repayment loans, receivables and loans with original maturity of

more than 2 years (Reserveverse Bank of India, 2012). In addition, the rule of Limit on

Total Retained Exposures states that: “total investment by the originator in the securities

issued by the SPV through underwriting or otherwise is limited to 20% of the total

securitised instruments issued” (Reserveverse Bank of India, 2012, p. 6).

12

China

To complete

Even though that securitiszation was first permitted in China in April 2005, it effectively

started in June 2012 due to the cancellation of the 2005 permission after two years,

following the 2007/8 global financial crisis (GFC). Possibly due to the high demand for

securitisation, the restarting of the securitisation in June 2012 with about 50billion Yuan

(about $7.9 billion) was quickly increased to 200billion Yuan within one year in August

2013. Arguably learning from the US experience during the GFC, the Chinese regulators,

Peoples Bank of China (PBC) and China Banking Regulatory Commission (CBRC), issued

a regulatory framework to guide the securitisation market. It contains six key features-

underlying assets, institutional access permission, risk retention, credit rating,

information disclosure and investor requirement. While the underlying assets

encourages financial institutions to focus on major infrastructure and other projects

with close link to the national industrial policy, the information disclosure requires a

higher level of transparency from all participants in the securitisation process. To further

enhance the process, it also requires that each securitisation transaction should have

two reputable credit rating agencies (See PBC, 2013; CBRC, 2014; Ngwu and Chen,

2016). The revised framework also increased the risk retention of the financial

institutions. In the earlier framework, the originating financial institution was required

to hold a certain percentage of the lowest class of securitised assets with a total

retention of not less than 5% of the total securitisation deal. The revised framework

requires the originating financial institution to the retain 5% of each class of the

securitised assets. As will be further explained, while the earlier version which required

limits to the amount of capital that can be released from securitisation, the revised

framework can be argued to be more liberal in terms of the potential capital that can be

released. While the regulation of securitisation in China can be argued to be reasonably

strident, a major concern which calls for consistent improvement of the regulation is the

significant exposure of the financial sector to the real estate sector and then to the wider

economy on one hand and then the high concentration of the Chinese financial sector

13

particularly the state owned banks (see IMF, 2011, Stanley, 2012, Chan et al., 2016, Ngwu

and Chen, 2016))

South Africa

Consistent with India, the South African securitisation market also experienced a

downturn during the GFC, in which the issuance volumes of securitisation dramatically

decreased to ZAR5billion (about $500million) in the period 2008 to 2009, representing

a considerable contrast with the year of 2007 with ZAR40billion (about 4billion)

issuance volume. The market however recovered from 2010 with a good upward trend

of about ZAR 25billion (about $2.5billion) in issuance volume in 2012 (Practical Law,

2012).

In terms of the regulation, the regulatory framework South Africa adopted is the

approach of monthly return concerning securitisation schemes (South African Reserve

Bank, 2012). This regulatory framework is intended to determine the reporting bank’s

amount of the securitised assets and the required amount of reserve capital for

securitisation exposures in the securitisation programme, and to obtain the selected

information associated with the securitisation schemes, containing the role of the

reporting bank in the securitisation for example (South African Reserve Bank, 2012).

Moreover, this framework also requires South African banks to properly identify, assess

and manage the risks relating to securitisation exposures, especially the potential risk

concentrations, and to review the maturity of credit assets involved in the securitisation

to address the issue of potential maturity mismatches, and not to purely rely on the

external credit ratings (South African Reserve Bank, 2012). In contrast with other BRICS

countries, the South African regulators have not applied the approach of MRR, which is

the main enhancement of the securitisation regulations in the global securitisation

sector after the 2007-08 financial crisis (Financial Stability Board, 2013). This

enhancement is aimed to improve the accountability of originating institutions (mostly

14

banks) in doing the securitisation, rather than taking less or even no consideration of the

quality of the securitised assets (Financial Stability Board, 2013). Nevertheless, because

the level of dependence on securitisation as a financing source is very low among the

South African banks, there is probably a low incentive to securitise in the South African

banking sector (Financial Stability Board, 2013). Under this circumstance, the Financial

Stability Board (2013) concludes that they will continue to monitor the applications of

securitisation in South Africa, and advocate South Africa regulators implement the

recommendation of risk retention which is provided by IOSCO in the ‘IOSCO’s Report on

Global Developments in Securitisation Regulation (Nov 2012)’ (IOSCO, 2012).

1.4 The Balance between the Risks and Benefits

As we discussed in section 1.2, the use of securitisation has very obvious advantages

and disadvantages, therefore the regulators of these five countries are currently facing a

number of challenges and policy decisions in order to develop securitisation in a

sustainable way. The aim in particular is to create a regulatory framework that prevents

the accumulation of risks and protects systemic stability. As anticipated, one regulatory

strategy that has been identified and employed to achieve this is represented by

minimum risk retentions. It is crucial in this sense for regulators on how to determine a

proper percentage or approach for the MRR requirement at in the post-financial crisis

era. Basically, if the MRR requirement is too high, banks and other financial

companies would have less incentive to participate in securitization as the amount of the

capital released from the securitisation exercise might be very small. On the other hand,

if the MRR requirement is too low, it would have several potential threats  like moral

hazard for the participants. Banks might decrease the lending criteria for the borrowers

as they can easily securitise the loan and whilst taking less responsibility and as a

consequence a higher risk for investors. As IOSCO (2012) highlighted in the final report

of global development in securitisation regulation, the MRR requirement has become a

15

focus of the regulatory attention since the GFC. For instance, the European Union (EU)

and the USA have adopted regulations wherethat the originators in EU and USA are

permitted to choose an approach from four and five MRR options respectively (IOSCO,

2012). The first option of the risk retention rules of the EU and USA are relatively similar

whereby the sponsor keeps no less than 5% of the par value of each tranches, and the

others give the sponsor more options for risk retention on their preference (IOSCO,

2012). Whereas, in comparison with 5% MRR requirement that the EU and USA adopted,

the percentage or approach for the MRR requirement are varied in emerging countries

(IOSCO, 2012). As we presented in the section 1.3, each BRICS countries has their unique

approaches for the MRR requirement and they are all stricter than the EU and USA,

possibly because of their different economic and financial sector developments. In

addition, IOSCO (2010) indicates that the securitisation regulations in emerging market

countries also face the challenge of the quality of prudential supervisions, business

conduct obligations and disclosure in particular. Arguably, tThe problems of the stricter

MRR requirements and other weaknesses in regulations and supervision are some of the

challenges thatfor the regulators of BRICS countries which have impeded the

development of the securitisation in BRICS markets. It is however also evident that the

5% retention requirement, that has been commonly employed in the US and EU, is by

some commentators considered not sufficient to align the economic interests of

originators and investors (Finance Watch 2014,.. which argued that an effective risk

retention should be at least 20%). This arguments have resurfaced in the context of the

EU project to revive the securitiszation market. It has been observed that requirements

of similar levels existed before the GFC in the US and for instance did not prevent Enron

from resorting to off-balance sheet finance on a massive scale. Similarly, a low

requirement does not reflect the reality of most transactions, where originators often

bear anyway the first loss on lower securitiszation tranches (Bavoso 2016).

Moreover, another crucial challenge is how to adjust the balance between the risk and

benefit when the securitisation market is depressed or booming. For instance, by the end

16

of 2013, one of the BRICS members, China, issued the adjustment on Chinese

securitisation regulation with respect to the MRR requirement ([2013] no. 21). The

major change was that the originating institutions of securitisation only need to hold 5%

capital for each class of the securitised assets (PBC, 2013; Wang, 2014). For instance, one

securitisation deal consists of three types of assets, 60% for asset A, 30% for asset B and

10% for asset C, and the risk weights for these three assets are 20%, 100% and 1250%

respectively. Under previous regulatory rules, the originating institution should hold

62.5% capital which is calculated by 5% * 100% * 1250%. While under the current

regulation, the requirement of capital holding is only 8.35% for the risk retention, which

is calculated out by the equation of 5% * (60%*20%+30%*100%+10%*1250%). In this

case, banks or other originators can release around 91.65% (100%-8.35%) capital of the

assets they securitised rather than 37.5% (100%-62.5%) under the previous regulatory

framework.

Nevertheless, the new regulatory regimelaw requires originator to keep no less than

5% amount of the securitisation products for risk retention (PBC, 2013). For example,

suppose the asset that banks securitised contains only one type asset which has the risk

weight of 20%. The originating bank should hold 5% capital instead of 1% which is

calculated by 5%*20%*100%. Furthermore, the holding period requirement has been

adjusted from not lower than the duration of the lowest class of securitises to not lower

than the duration of the each class of securitises. As Wang (2014) maintains, this

adjustment significantly improves the effect of securitisation and also leads banks to

have more incentive to conduct securitisation. On the other hand, the risk associated

with the banks and even the whole banking sector has been increased due to the

reduction of risk retention requirement. Arguably, it is a pretty difficult decision that the

regulators should make to rescue the securitisation market and control the risks to

create and sustain a balanced circumstance.

Furthermore, contrasting with developed countries, the limited size and development of

the financial sector of the BRICS are constraining their securitisation market. At post-

17

financial crisis era, the authorities of emerging economies countries have little abilities

to cope with the issue of capital outflows as the financial institutions of advanced

economies countries need the capital to rescue themselves (BIS, 2010). Since the second

quarter of 2013, portfolio flow in emerging economies have been negative possibly due

to the reduction of the flow of easy money caused by US monetary policy and the

emerging economic weakening in China (BIS, 2014). At the same time, the issue of the

currency appreciation in emerging markets might lead to capital reversals as the value of

the debts, equities and currencies invested by the mature market countries are declining

in comparison with their own currencies (BIS, 2014). For instance, the exchange rates of

emerging markets decreased roughly 10% against US dollar in 2013, with the value of

the investments in these economies experiencing depreciation (BIS, 2014). As one of the

consequences, the securitisation market in these emerging markets is being constrained

due to the low willingness of originator which can also be attributed to the limited

development of their financial sectors.

1.5 Prospects of Securitisation in BRICS

On other hand, tThe issue of capital outflows highlight the importance of the use of

securitisation and provide an opportunity for the governments to effectively support the

development of their securitisation markets in order to resolve the financing problem

which will in turn enhance the development of the financial sector and their economies.

Based on the analysis, we predict three main possible outcomes for the future of the

securitisation market in the BRICS. Firstly, under current circumstances of the pressure

for capital outflows, the governments of the BRICS are required to come up with the

solution to keep the stability of their financial market. At the same time, financial

institutions, especially banks are expected to help find a solution to asset-liability

imbalance in this particular period. As we discussed in the section 1.2, the fundamental

characteristic of securitisation is to provide financial institutions with another path for

raising fund. Thus, regulators of the BRICS need to grasp this opportunity to improve

their securitisation market. For instance, in the April of 2015, Chinese regulators have

18

announced a significant adjustment that the financial institutions who had originated a

securitisation programme and compliant with the requirement of disclosure can apply

for registration and the validity is two years (PBC, 2015). The change of “approval

system” to “registration system” in the retention requirements maywould give

originators more convenience and stimulate them to participate in doing securitisation.

Using the Chinese example, we predict that the regulators of the BRICS would focus on

the positive adjustments of the securitisation rules to encourage the development of the

securitisation market. Particularly, the changes may concentrate on the improvement of

the limit of the issuing scale, the simplification of the issuing procedure and the

reduction of the requirement of the MRR on the securitisation backed by the high-quality

assets such as infrastructure projects.

Secondly, since the restart of securitisation around 2010 in most BRICS countries,

the process of expanding securitisation in these countries can be described as relatively

slow paced. Moreover both regulators and financial institutions have accumulated some

experiences on how to process a securitisation programme even though the issuing scale

of the securitisation might be small. This enhances their understanding of the

significance and benefits of securitisation. In terms of the regulators, based on the past

experiences, they could properly examine the economic condition and the circumstances

of securitisation market of their country, and thereby set up a more appropriate

percentage for the MRR requirement to balance the risks and benefits. Further, they

could address the rules which influence the enthusiasm of financial institutions on

carrying out securitisation. As for other participators, mainly sponsors, they have

actually found the advantages of the securitisation from the experience of conducting

securitisation, like financing, asset-liability management and risk diversification.

Moreover, during the securitisation process, the sponsors have gradually comprehended

the importance of each regulatory requirement and have a better cooperation with the

regulators over time. Therefore, in the future, the regulation of the securitisation will be

more effective and originators will be more willing to participate in doing securitisation.

Thirdly, in comparison with developed economies, the financial practitioners in the

19

BRICS have less experience on the problems caused by securitisation during the GFC and

may not purely understand the complexity of securitisation and causes of GFC. Under

this circumstance, in addition to the slow pace in the expansion of the pilot program

scale and incentive regulatory adjustments, the regulators can gradually concentrate

more on the aspects of standardisation, information disclosure and credit rating of the

securitisation programme. For instance, by May 2015, Hongsheng Pan, the vice president

of People's Bank of China, hosted a briefing in relation ‘to further promote the

sustainable development of asset securitisation market’ (PBC, 2015). Pan indicated that

with the release of the new 500 billion total allowance of securitisation, the central

factor is the risk control, where the market operating mechanism should be enhanced,

the market discipline of information disclosure and credit rating should be complied

with, the level of product standardisation should be improved (PBC, 2015). At the

briefing, a Bloomberg journalist questioned the concern about whether China’s

regulators have the relevant plan to ensure that the asset securitisation programme will

be secure as the securitisation programme in the USA had led to a financial crisis, and

how could China avoid a repeat of the securitisation failure that occurred in the the USA

made (PBC, 2015). Pan explained that China has learned and analysed the experiences

on the development of securitisation of the developed economies both on pre and post

financial crisis era, and has found that core of the securitisation market is related to

innovation and risk control (PBC, 2015). In Chinese securitisation market, Pan further

explained that there are three main aspects on regulations: first is the prohibition of re-

securitisation which ensures that the securitisation transaction is simple and

transparent and thereby the risk can be easily recognised in comparison with the re-

securitisation product. Second is to adhere to the concept of coordination of market

innovation and regulation, whilst strengthening the coordination of regulators. Third is

to enhance system structure such as (i) build a dynamic, standard and transparent

information disclosure mechanism including the duration of the securitisation

production. (ii) Strengthen the standardisation management on the originator, rating

agencies and other intermediary agencies and supervise the intermediaries to

20

implement their responsibilities. (iii) Further improve the system of risk retention,

where the issuer needs to take the part of asset securitisation products for the retention

and therefore prevent the moral hazard in the process of asset originationsecuritisation

(PBC, 2015). Hence, along the lines of what is being done in China, we predict that the

regulators of the BRICS would ensure the development of the securitisation market on a

sound and sustainable basis, where transparency and standardisation will be the two

main aspects for the additions of the regulation of risk retention. Consequently, we

consider that the securitisation market of the BRICS will likely succeed even with the

challenges, which include the balance of the risks and benefits and the limited

development of the respective financial sectors.

1.6 Conclusion

Given the benefits and risks of securitisation, it is no doubt a double-edged sword for the

financial regulators and especially for the emerging economies than the developed

economies. With a proper regulation and market discipline, the securitisation can

perform a good function of financing through securitising the infrastructure projects as a

typical example, while it can also lead to a financial tsunami due to the contagion effect

that the GFC experienced. While we appreciate how securitisation contributed to the

GFC, it is still a tool which if well regulated can help in addressing the funding

constraints of the BRICS and other developing countries. What is required is for the

governments to adopt more prudential approach such as higher MRR requirement. With

the increasing regulation of securitisation, we believe that challenges such as the limited

size and development of the financial sectors in developing and emerging markets also

provides an opportunity for the governments to effectively support the development of

21

their securitisation markets which will in turn enhance the development of the financial

sector and their economies. Further, with the experiences that the regulators, potential

sponsors and other participators have accumulated, and the strong need of the

alternative funding sources, the need to explore the opportunities in securitisation is

strengthened.

References

Acharya, V.V. & Richardson, M. 2009, "CAUSES OF THE FINANCIAL CRISIS", Critical Review, vol. 21, no. 2-3, pp. 195-210.

Acharya, V., Schnabl, P., & Suarez, G. (2013). Securitization without risk transfer. Journal ofFinancial Economics, 107, 515–536.Altunbas, Y., Gambacorta, L. & Marques-Ibanez, D. 2009, "Securitisation and the bank

lending channel", European economic review, vol. 53, no. 8, pp. 996-1009.Aris, B. 2012, Russia: the return of securitisation. The Financial Times. April 23, [Online]

Available from: http://blogs.ft.com/beyond-brics/2012/04/23/russia-the-return-of-securitisation/[Accessed 12th July 2014].

Arner D. 2009, “The Global Credit Crisis of 2008: Causes and Consequences”, The International Lawyer, Vol.43, no.1;Avgouleas, E. 2012, Governance of global financial markets: the law, the economics, the

politics, Cambridge University Press, Cambridge.Bavoso V. 2013, Financial innovation and structured finance: The case of securitisation.

22

Company Lawyer, 01, 3–11.Bavoso V. 2016, High Quality Securitisation and EU Capital Markets Union – Is it Possible?, Accounting Economics and the Law, A Convivium, forthcoming.Bavoso V. 2017, Filling the Accountability Gap in Structured Finance Transactions. The Case for a Broader Fiduciary Obligation, Columbia Journal of European Law, forthcoming.Bayar, Y. 2014, "Recent Financial Crises and Regulations on the Credit Rating Agencies",

Research in World Economy, vol. 5, no. 1, pp. 49-58.BCBS. 1998, International convergence of capital measurement and capital standards

(updated to April 1998), [online], Basel, Switzerland, Bank for International Settlements (BIS). Available at: https://www.bis.org/publ/bcbsc111.pdf [Accessed 10th August 2014].

BCBS. 2006, Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework - Comprehensive Version (ISBN 92-9197-720-9), [online], Basel, Switzerland, Bank for International Settlements (BIS). Available at: http://www.bis.org/publ/bcbs128.pdf [Accessed 10th August 2014].

BCBS. 2010, Basel III: A global regulatory framework for more resilient banks and banking systems - revised version June 2011(ISBN 92-9197-859-0), [online], Basel, Switzerland, Bank for International Settlements (BIS). Available at: http://www.bis.org/publ/bcbs189.pdf [Accessed 10th August 2014].

BCBS. 2013a, Regulatory Consistency Assessment Programme (RCAP) Assessment of Basel III regulations in Brazil (ISBN 92-9197-977-5), [online], Basel, Switzerland, Bank for International Settlements (BIS). Available at: www.bis.org/bcbs/implementation/l2_br.pdf [Accessed 27 July 2014].

BCBS. 2013b, Regulatory Consistency Assessment Programme (RCAP) Assessment of Basel III regulations – China (ISBN 92-9197-965-1), [online], Basel, Switzerland, Bank for International Settlements (BIS). Available at: http://www.bis.org/bcbs/implementation/l2_cn.pdf [Accessed 07 August 2014].

Bessis, J. 2010, Risk management in banking, 3rd edn, John Wiley, Chichester. BIS. 2010, The global crisis and financial intermediation in emerging market economies ,

[online], Basel, Switzerland, Bank for International Settlements (BIS). Available at: http://www.bis.org/publ/bppdf/bispap54.pdf [Accessed 03 March 2015].

BIS. 2014, Emerging market economies respond to market pressure , [online], Basel,

Switzerland, Bank for International Settlements (BIS). Available at:

http://www.bis.org/publ/qtrpdf/r_qt1403a.pdf [Accessed 03 March 2015].BIS 2015, “Why does financial sector growth crowd out real economic growth”, BIS working paper 490.Caprio G. Jr., Demirguc-Kunt A., Kane E., 2008, “The 2007 Meltdown in Structured Securitization; Searching for Lessons, Not Scapegoats”, The World Bank, Development Research Group, Finance and Private Sector Team, WP 4756.Carmichael, J., Fleming, A. and Llewellyn, D. 2004, Aligning financial supervisory

structures with country needs (available in the ‘Documents and Reports’ section of the World Bank’s web site).

23

Caruana, J. & Narain, A. 2008, "Banking on More Capital", Finance & Development, vol. 45, no. 2, pp. 24-28.

Casu, B., Clare, A., Sarkisyan, A. & Thomas, S. 2013, "Securitization and Bank Performance", Journal of Money, Credit and Banking, vol. 45, no. 8, pp. 1617-1658.

Casu, B., Girardone, C. & Molyneux, P. 2006, Introduction to banking, FT/Prentice Hall, Harlow.

CBRC. 2011a, The China banking regulatory commission’s guidance on the implementation of new regulatory standards in Chinese banking sector, [online], Beijing, China, China Banking Regulatory Commission. Available from: http://www.cbrc.gov.cn/chinese/home/docView/20110503615014F8D9DBF4F4FFE45843249ABE00.html[Accessed 22nd March 2014].

CBRC. 2011b, Chinese banking sector open the regulation on foreign banks during the accession to the WTO ten years, [online], Beijing, China, China Banking Regulatory Commission. Available from: http://www.cbrc.gov.cn/chinese/home/docView/F66A0967E8A74157AD58642D5A1BEF76.html [Accessed 10th July 2014].

CBRC. 2014a, Banking financial institutions in China, [online], Beijing, China, China Banking Regulatory Commission (CBRC). Available from: http://www.cbrc.gov.cn/chinese/jrjg/index.html [Accessed 10th July 2014].

CBRC. 2014b, The banking regulatory statistical indicators table on a quarterly basis 2014, [online], Beijing, China, China Banking Regulatory Commission (CBRC). Available from: http://www.cbrc.gov.cn/chinese/home/docView/8997215386094C44BB1D69864308B6EB.html [Accessed 10th July 2014].

CBRC. 2014c, About the CBRC, [online], Beijing, China, China Banking Regulatory Commission. Available from: http://www.cbrc.gov.cn/showyjhjjindex.do [Accessed 10th July 2014].

Charlie, F. 2013, Could there be a bubble in the Chinese housing market?, The Irish Times Ltd, Dublin.

Chen, Q, 2012. Regulators restart loan securitization program. People's Daily. Jun 5, [Online], Available from: http://english.peopledaily.com.cn/90778/7835886.html [Accessed 21st March 2014].

CICC. 2014, Research Report: China International Capital Corporation (CICC) - Evaluation on the new regulatory rules of the risk retention requirement for originating institutions in credit asset securitization: The obstacle of risk slow-release addressed, but new problems appear - 140103, [online], Beijing, China. Hibor. Available from: http://www.hibor.com.cn/docdetail_1193922.html [Accessed 3rd August 2014].

CRBC. 2005, The China Banking Regulatory Commission’s announcement [2005] no. 3, [online], Beijing, China, Beijing, China, China Banking Regulatory Commission. Available from: http://www.cbrc.gov.cn/govView_FDE9B2BBC6D7482FA363C0754251572B.html [Accessed 24th March 2014].

Criado S. and Van Rixtel A. (2008) “Structured Finance and the Financial Turmoil of 2007-2008: An Introductory Overview”, Banco De Espana, No.0808.

24

Danila, O.M. 2012, "Impact and Limitations Deriving from Basel II within the Context of the Current Financial Crisis", Theoretical and Applied Economics, vol. 6(571), no. 6(571), pp. 121-134.

Davies, B. 2011, The Great Property Bubble of China May Be Popping. THE WALL STREET JOURNAL. June 9, [Online] Available from: http://online.wsj.com/news/articles/SB10001424052702304906004576367121835831168 [Accessed 24th March 2014].

Davies, H. & Green, D. 2008, Global financial regulation: the essential guide, Polity Press, Cambridge.

Davies, H. 2010, The financial crisis: who is to blame? Polity Press, Cambridge.De Vries Robbe J., Ali P. 2006, “Synthetic CDOs: The State of Play”, Journal of International Banking Law and Regulation, 21(1). Directive 2013/36/EU CRD-IV Economist. 2014, Double bubble trouble: China’s property prices appear to be falling

again. The Economist Newspaper. March 22, [Online] Available from: http://www.economist.com/news/china/21599395-chinas-property-prices-appear-be-falling-again-double-bubble-trouble [Accessed 26th March 2014].

EU Commission Consultation Document (2015) “An EU Framework for Simple, Transparent and Standardised Securitisation”, February; EU Commission Green Paper. (2015). “Building a Capital Markets Union”, Com(2015) 63 Final.Euroweek, 2013, Russian securitization plans get a helping hand from Basel capital

requirements, Euromoney Trading Limited, London.Fabozzi, F.J. & Kothari, V. 2008, Introduction to securitization, John Wiley & Sons,

Hoboken, N.J. Finance Watch 2014, A Missed Opportunity to Revive “Boring” Finance, December.Financial Stability Board. 2013, 2013 IMN Survey of National Progress in the

Implementation of G20/FSB Recommendations - Jurisdiction: South Africa, [online], Basel, Switzerland, Financial Stability Board. Available from: http://www.financialstabilityboard.org/implementation_monitoring/south_africa_2013.pdf [Accessed 3rd August 2014].

Financier Worldwide. 2014, New developments in Russian infrastructure securitisation, [online], Birmingham, United Kingdom, Financier Worldwide Ltd. Available from: http://www.financierworldwide.com/new-developments-in-russian-infrastructure-securitisation/#.U8RbdO9KU71 [Accessed 14th July 2014].

Herring, R.J. 2007, "The Rocky Road to Implementation of Basel II in the United States", Atlantic Economic Journal, vol. 35, no. 4, pp. 411-429.

ICRA, 2012. UPDATE ON INDIAN SECURITISATION MARKET-FY2012, [online], New Delhi, India, ICRA Ltd (An Associate of Moody’s Investors Services). Available from: http://icra.in/Files/Articles/Indian%20Securitisation.pdf [Accessed 31th July 2014].

International Financial Law Review (IFLR), 2013, China needs an integrated securitisation market, International Financial Law Review, May 23, [Online] Available from:http://www.iflr.com/Article/3209910/China-needs-an-integrated-securitisation-market.html [Accessed 5th August 2014].

25

International Financial Law Review (IFLR), 2014, Russian reforms permit new securitisation structures, Euromoney Trading Limited, London.

IOSCO, 2010. Securitization and Securitized Debt Instruments in Emerging Markets: Final Report, [online], Madrid, Spain, The International Organization of Securities Commissions (IOSCO). Available from: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD334.pdf [Accessed 15rd August 2014].

IOSCO, 2012. Global Developments in Securitisation Regulation: Final Report, [online], Madrid, Spain, The International Organization of Securities Commissions (IOSCO). Available from: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD394.pdf[Accessed 3rd August 2014].

Jaffee, D, Lynch, A, Richardson, M & Nieuwerburgh, S.V. 2009, "Mortgage Origination and Securitization in the Financial Crisis", Financial Markets, Institutions & Instruments, vol. 18, no. 2, pp. 141-143.

Jaffer, S., Morris, N., Sawbridge, E. and Vines, D. (2014) ‘How Changes to the Financial Services Industry Eroded Trust’, in N. Morris and D. Vines (eds), Capital Failure: Rebuilding Trust in Financial Services. Oxford: Oxford University PressJaffer, S., Morris, N., Sawbridge, E. and Vines, D. (2014) ‘How Changesto the Financial Services Industry Eroded Trust’, in N. Morris and D.Vines (eds), Capital Failure: Rebuilding Trust in Financial Services.Oxford: Oxford University Press.Jennifer, H. 2008, "Subprime Crisis More Aptly Called a 'Securitization Crisis'", National

Mortgage News, vol. 33, no. 11, pp. 6.Kirk, J. & Ross, J. 2013, Modern financial regulation, Jordans Publishing Limited, Bristol.Koch, T.W. & MacDonald, S.S. 2010, Bank Management, 7th edn, Thomson/South-WesternLiaw, K.T. 2006, The business of investment banking: a comprehensive overview, 2nd edn,

John Wiley & Sons, Hoboken, New Jersey.Liaw, K.T. 2012, The business of investment banking: a comprehensive overview, 3rd edn,

John Wiley & Sons, Hoboken, New Jersey.MacNeil, I.G. & O'Brien, J. (eds.) 2010, The future of financial regulation, Hart Publishing,

Oxford.Mohanty, S.K. 2008, "Basel II: challenges and risks", Academy of Banking Studies Journal,

vol. 7, no. 1-2, pp. 109-130.Moody’s Investors Service. 2012a, Latin America Securitization: 2012 Outlook, [online],

London, IFIR Magazine Euromoney Institutional Investor PLC. Available from: http://www.iflr.com/pdfs/Latin%20American%20Securitization%202012%20Outlook.pdf[Accessed 28th July 2014].

Moody’s Investors Service. 2012b, Latin America Securitization: 2013 Outlook, [online], Moody’s Investors Service, Inc. Available from: http://pg.jrj.com.cn/acc/Res/CN_RES/MAC/2012/12/11/71942b16-daa7-459a-b0b4-67a3a57b75e8.pdf [Accessed 28th July 2014].

Moosa, I.A. 2010, "Basel II as a casualty of the global financial crisis", Journal of banking regulation, vol. 11, no. 2, pp. 95-114.

26

Mullard, M. 2012, "The Credit Rating Agencies and Their Contribution to the Financial Crisis", The Political Quarterly, vol. 83, no. 1, pp. 77-95.

Papaikonomou, V.L. 2010, "Credit rating agencies and global financial crisis: need of a paradigm shift in financial market regulation", Studies in economics and finance, vol. 27, no. 2, pp. 161-174.

PBC. 2013, The People's Bank of China and the China Banking Regulatory Commission’s announcement [2013] no. 21, [online], Beijing, China, The PEOPLE’S BANK OF CHINA (China’s Central Bank). Available from: http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2013/20131231171544994140659/20131231171544994140659_.html [Accessed 14th July 2014].

PBC. 2014, About PBC, [online], Beijing, China, The PEOPLE’S BANK OF CHINA (China’s Central Bank). Available from: http://www.pbc.gov.cn/publish/english/952/index.html [Accessed 10th July 2014].

PBC. 2015, The people's bank of China’s announcement [2015] no. 7, [online], Beijing, China, The PEOPLE’S BANK OF CHINA (China’s Central Bank). Available from: http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2015/20150403151018916890529/20150403151018916890529_.html [Accessed 27th April 2015].

PBC. 2015, Vice President Gongsheng Pan attended the State Council’s policy briefing , [online], Beijing, China, The PEOPLE’S BANK OF CHINA (China’s Central Bank). Available from: http://www.pbc.gov.cn/publish/hanglingdao/3863/2015/20150515162034540928176/20150515162034540928176_.html [Accessed 27th June 2015].

Peicuti, C. 2013, "Securitization and the subprime mortgage crisis", Journal of post-Keynesian economics, vol. 35, no. 3, pp. 443-455.

Piketty T. 2013 “Capital in the Twenty-First Century”, Harvard University Press.Practical Law. 2012, Structured lending and securitisation in South Africa: overview ,

[online], London, Practical Law. Available from: http://uk.practicallaw.com/4-521-4150?source=relatedcontent [Accessed 3rd August 2014].

PWC Russia. 2013, A new lease on life for Russian securitisation, [online], Moscow, Russia, PricewaterhouseCoopers Legal CIS B.V. Available from: http://www.pbc.gov.cn/publish/english/952/index.html [Accessed 10th July 2014].

Rajan R. 2005, “Has Financial Development Made the World Riskier?”, NBER Working Paper 11728, November.

Reverse Bank of India. 2012, Revisions to the Guidelines on Securitisation Transactions, [online], Mumbai, India, Reverse Bank of India (India’s Central Bank). Available from: http://rbidocs.rbi.org.in/rdocs/notification/PDFs/FIGUSE070512.pdf [Accessed 31th July 2014].

Rita, T. 2006, "Securitization theory and securitization studies", Journal of International Relations and Development, vol. 9, no. 1, pp. 53-61.

Robin, G. 2013, Chinese Housing Bubble, Infomart, a division of Postmedia Network Inc, Toronto, Ont.

Rose, P.S. & Hudgins, S.C. 2013, Bank management & financial services, 9th edn, McGraw-Hill/Irwin, Boston.

27

Schwarcz S. 2009, “Regulating Complexity in Financial Markets”, Washington University Law Review, Vol.87:211, Issue 2. SNL Financial. 2013, Largest 100 banks in the world, [online], Virginia, USA, SNL Financial

LC. Available from: http://www.snl.com/InteractiveX/Article.aspx?cdid=A-26316576-11566 [Accessed 8th July 2014].

Solomon, D. 2012, "The rise of a giant: securitization and the global financial crisis", American business law journal, vol. 49, no. 4, pp. 859-890.

South African Reserve Bank, 2012, Government Gazette Staatskoerant - Republic of South Africa, [online], Pretoria, South Africa, South African Reserve Bank (South Africa’s Central Bank). Available from: https://www.resbank.co.za/SiteAssets/Lists/News%20and%20Publications/EditForm/35950_12-12_ReserveBankCV01.pdf [Accessed 3rd August 2014].

Tarullo, D.K. 2008, Banking on Basel: the future of international financial regulation, Peterson Institute for International Economics, Washington DC.

Trust-one. 2014, The notice on the relevant issues relating to the expansion of the pilot programs of asset securitisation, [online], Shanghai, China, Trust-one. Available from: http://www.trust-one.com/index.do?method=newDetail&id=4028a0954398891e01439a3e1e580079 [Accessed 15th July 2014].

Turner A. (2009), “The Turner Review – A Regulatory Response to the Global Banking Crisis”, FSA March.Turner A. 2015, “Between Debt and the Devil”, Princeton University Press.Valdez, S. & Molyneux, P. 2013, An introduction to global financial markets, 7th edn,

Palgrave Macmillan, Basingstoke, England.Wang, J. 2013, China needs an integrated securitisation market. International Financial

Law Review (IFLR). May 23, [Online] Available from: http://www.iflr.com/Article/3209910/China-needs-an-integrated-securitisation-market.html[Accessed 26th March 2014].

Wang, S. 2014, Regulation Updates in China, [online], United State, Baker & McKenzie. Available from: http://www.bakermckenzie.com/files/Publication/f8e37b63-c76a-4f2d-8f75-8ae9386b4929/Presentation/PublicationAttachment/6ad4f7e2-a395-49e2-8945-ebaaef6f4d89/AL_ChinaUpdates_Jan2014.pdf [Accessed 22nd March 2014].

Wei, L. 2012, China to Start Trial Securitization Program for Banks. THE WALL STREET JOURNAL. June 18, [Online] Available from: http://online.wsj.com/news/articles/SB10001424052702303703004577474081229472226 [Accessed 25th March 2014].

Wong, N, 2012. China to let banks securitise up to $7.9 bln of assets-IFR . Thomson Reuters. Jun 6, [Online], Available from: http://www.reuters.com/article/2012/06/06/china-securitisation-idUSL3E8H61TU20120606 [Accessed 21st March 2014].

Zalewski, D.A. 2010, "Securitization, social distance, and financial crises", Forum for social economics, vol. 39, no. 3, pp. 287-294.

28

Zhao, H. 2013, Exclusive: China securitization plan expanded to include foreign banks – sources. Thomson Reuters. Oct 31, [Online] Available from: http://www.reuters.com/article/2013/10/31/us-china-debt-foreignbanks-idUSBRE99U09820131031 [Accessed 22nd March 2014].

29