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Credit Risk Dynamics of Infrastructure Investment: Considerations for Financial Regulators

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dc.contributor.authorJobst, Andreas A.
dc.date.accessioned2018-03-30T16:37:48Z
dc.date.available2018-03-30T16:37:48Z
dc.date.issued2018-03
dc.description.abstractPrudential regulation of infrastructure investment plays an important role in creating an enabling environment for mobilizing long-term finance from institutional investors, such as insurance companies, and, thus, gives critical support to sustainable development. Infrastructure projects are asset-intensive and generate predictable and stable cash flows over the long term, with low correlation to other assets; hence they provide a natural match for insurers' liabilities-driven investment strategies. The historical default experience of infrastructure debt suggests a "hump-shaped" credit risk profile, which converges to investment grade quality within a few years after financial close -- supported by a consistently high recovery rate with limited cross-country variation in non-accrual events. However, the resilient credit performance of infrastructure -- also in emerging market and developing economies -- is not reflected in the standardized approaches for credit risk in most regulatory frameworks. Capital charges would decline significantly for a differentiated regulatory treatment of infrastructure debt as a separate asset class. Supplementary analysis suggests that also banks would benefit from greater differentiation, but only over shorter risk horizons, encouraging a more efficient allocation of capital by shifting the supply of long-term funding to insurers.en
dc.identifierhttp://documents.worldbank.org/curated/en/125511521722022110/Credit-risk-dynamics-of-infrastructure-investment-considerations-for-financial-regulators
dc.identifier.doi10.1596/1813-9450-8373
dc.identifier.urihttps://hdl.handle.net/10986/29553
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 8373
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectPROJECT FINANCE
dc.subjectCREDIT RISK
dc.subjectINFRASTRUCTURE INVESTMENT
dc.subjectINSURANCE REGULATION
dc.subjectBANKING REGULATION
dc.subjectINSURANCE CAPITAL
dc.subjectSOLVENCY REGIME
dc.subjectBASEL III
dc.titleCredit Risk Dynamics of Infrastructure Investmenten
dc.title.subtitleConsiderations for Financial Regulatorsen
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleCredit Risk Dynamics of Infrastructure Investment: Considerations for Financial Regulators
okr.date.disclosure2018-03-26
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/en/125511521722022110/Credit-risk-dynamics-of-infrastructure-investment-considerations-for-financial-regulators
okr.guid125511521722022110
okr.identifier.doi10.1596/1813-9450-8373
okr.identifier.externaldocumentum090224b085927300_5_0
okr.identifier.internaldocumentum29741022
okr.identifier.reportWPS8373
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/125511521722022110/pdf/WPS8373.pdfen
okr.statistics.combined7720
okr.statistics.dr125511521722022110
okr.statistics.drstats7084
okr.topicFinance and Financial Sector Development::Financial Intermediation
okr.topicFinance and Financial Sector Development::Financial Regulation & Supervision
okr.topicFinance and Financial Sector Development::Insurance & Risk Mitigation
okr.topicInfrastructure Economics and Finance::Infrastructure Finance
okr.topicInfrastructure Economics and Finance::Infrastructure Regulation
okr.unitOffice of the Managing Director and Chief Financial Officer
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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