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Title: Securitization and credit quality
Authors: Kara, Alper
Marques-Ibanez, David
Ongena, Steven
Keywords: Securitization
Credit risk
European market
Issue Date: 2017
Publisher: © European Central Bank
Citation: KARA, A., MARQUES-IBANEZ, D. and ONGENA, S., 2017. Securitization and credit quality. European Central Bank, Working Paper Series; 2009, Frankfurt: European Central Bank, 42pp.
Abstract: Banks are usually better informed on the loans they originate than other financial intermediaries. As a result, securitized loans might be of lower credit quality than otherwise similar non-securitized loans. We assess the effect of securitization activity on loans’ relative credit quality employing a uniquely detailed dataset from the euro-denominated syndicated loan market. We find that, at issuance, banks do not seem to select and securitize loans of lower credit quality. Following securitization, however, the credit quality of borrowers whose loans are securitized deteriorates by more than those in the control group. We find tentative evidence suggesting that poorer performance by securitized loans might be linked to banks’ reduced monitoring incentives. From our findings it follows that current iniciatives on risk retention by the originator, and more detailed loan-by-loan information on loan credit quality would be useful to reap out the benefits of securitization.
Description: This working paper was published by the European Central Bank and the definitive published version is available at http://dx.doi.org/10.2866/696711
Version: Published
DOI: 10.2866/696711
URI: https://dspace.lboro.ac.uk/2134/24590
Publisher Link: http://dx.doi.org/10.2866/696711
ISBN: 9789289927314
ISSN: 1725-2806
Appears in Collections:Working Papers (Business)

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