Working Paper

Credit Risk Dynamics of Infrastructure Investment : Considerations for Financial Regulators

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collection.link.5
https://openknowledge.worldbank.org/handle/10986/9
collection.name.5
Policy Research Working Papers
dc.contributor.author
Jobst, Andreas A.
dc.date.accessioned
2018-03-30T16:37:48Z
dc.date.available
2018-03-30T16:37:48Z
dc.date.issued
2018-03
dc.date.lastModified
2019-08-02T19:13:25Z
dc.description.abstract
Prudential 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.identifier
http://documents.worldbank.org/curated/en/125511521722022110/Credit-risk-dynamics-of-infrastructure-investment-considerations-for-financial-regulators
dc.identifier.uri
http://hdl.handle.net/10986/29553
dc.language
English
dc.publisher
World Bank, Washington, DC
dc.relation.ispartofseries
Policy Research Working Paper;No. 8373
dc.rights
CC BY 3.0 IGO
dc.rights.holder
World Bank
dc.rights.uri
http://creativecommons.org/licenses/by/3.0/igo
dc.subject
PROJECT FINANCE
dc.subject
CREDIT RISK
dc.subject
INFRASTRUCTURE INVESTMENT
dc.subject
INSURANCE REGULATION
dc.subject
BANKING REGULATION
dc.subject
INSURANCE CAPITAL
dc.subject
SOLVENCY REGIME
dc.subject
BASEL III
dc.title
Credit Risk Dynamics of Infrastructure Investment
en
dc.title.subtitle
Considerations for Financial Regulators
en
dc.type
Working Paper
en
okr.date.disclosure
2018-03-26
okr.doctype
Publications & Research
okr.doctype
Publications & Research :: Policy Research Working Paper
okr.docurl
http://documents.worldbank.org/curated/en/125511521722022110/Credit-risk-dynamics-of-infrastructure-investment-considerations-for-financial-regulators
okr.googlescholar.linkpresent
yes
okr.identifier.doi
10.1596/1813-9450-8373
okr.identifier.externaldocumentum
090224b085828c3d_3_0
okr.identifier.internaldocumentum
29741022
okr.identifier.report
WPS8373
okr.imported
true
en
okr.language.supported
en
okr.pdfurl
http://documents.worldbank.org/curated/en/125511521722022110/pdf/WPS8373.pdf
en
okr.topic
Finance and Financial Sector Development :: Financial Intermediation
okr.topic
Finance and Financial Sector Development :: Financial Regulation & Supervision
okr.topic
Finance and Financial Sector Development :: Insurance & Risk Mitigation
okr.topic
Infrastructure Economics and Finance :: Infrastructure Finance
okr.topic
Infrastructure Economics and Finance :: Infrastructure Regulation
okr.unit
Office of the Managing Director and Chief Financial Officer

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