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Securitisation and Banks' Net Interest Margins

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  • JOSHUA KIRKWOOD
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    Abstract

    This article develops a theoretical model of the effect of securitisation on banks' net interest margins (NIMs). The model incorporates a dual role for securitisation. The direct effect accounts for the influence of securitisation on banks' funding costs. The indirect effect recognises that the development of securitisation markets made it possible for mortgage originators to compete with banks, which contributed to a decline in banks' market power and a fall in their NIMs. In estimating the model econometrically, this article finds evidence that both the direct and indirect effects worked to reduce Australian banks' NIMs prior to the onset of the credit crisis. Copyright © 2010 The Economic Society of Australia.

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    Bibliographic Info

    Article provided by The Economic Society of Australia in its journal Economic Record.

    Volume (Year): 86 (2010)
    Issue (Month): 274 (09)
    Pages: 329-341

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    Handle: RePEc:bla:ecorec:v:86:y:2010:i:274:p:329-341

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    Cited by:
    1. Kevin Davis, 2011. "The Australian Financial System in the 2000s: Dodging the Bullet," RBA Annual Conference Volume, in: Hugo Gerard & Jonathan Kearns (ed.), The Australian Economy in the 2000s Reserve Bank of Australia.

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