Advanced Search
MyIDEAS: Login to save this article or follow this journal

Securitization, risk-transferring and financial instability: The case of Spain

Contents:

Author Info

  • Carbó-Valverde, Santiago
  • Marques-Ibanez, David
  • Rodríguez-Fernández, Francisco

Abstract

The 2007–2010 financial crisis has hit a variety of countries asymmetrically. The case of Spain is particularly illustrative as it exemplifies in a vivid manner most of the core issues largely responsible for the crisis. This country experienced a pronounced housing bubble partly funded via spectacular developments in its securitization markets leading to looser credit standards and subsequent financial stability problems. We analyze the sequential deterioration of credit in Spain considering rating changes in securitized deals. Using a sample of 20,286 observations on securities and rating changes from 2000Q1 to 2010Q1 we build a model in which loan growth, on balance-sheet credit quality and rating changes are estimated simultaneously. Our results suggest that loan growth significantly affects on balance-sheet loan performance with a lag of at least two years. Additionally, loan performance is found to explain rating changes with a lag of four quarters. Importantly, bank characteristics (in particular, observed solvency, cash-flow generation and cost efficiency) also affect ratings considerably. Additionally, these other bank characteristics seem to a higher weight in the rating changes of securities issued by savings banks as compared with commercial banks.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0261560611001574
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 31 (2012)
Issue (Month): 1 ()
Pages: 80-101

as in new window
Handle: RePEc:eee:jimfin:v:31:y:2012:i:1:p:80-101

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30443

Related research

Keywords: Securitization; Lending; Risk; Financial instability;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Darrell Duffie, 2008. "Innovations in credit risk transfer: implications for financial stability," BIS Working Papers 255, Bank for International Settlements.
  2. Alan Greenspan, 2005. "Risk transfer and financial stability," Proceedings 968, Federal Reserve Bank of Chicago.
  3. Dell’Ariccia, G. & Igan, D. & Laeven, L., 2009. "Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market," Discussion Paper 2009-46 S, Tilburg University, Center for Economic Research.
  4. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
  5. Giovanni Dell'Ariccia & Luc Laeven & Deniz Igan, 2008. "Credit Booms and Lending Standards," IMF Working Papers 08/106, International Monetary Fund.
  6. Instefjord, Norvald, 2005. "Risk and hedging: Do credit derivatives increase bank risk?," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 333-345, February.
  7. Brent Ambrose & Michael LaCour-Little & Anthony Sanders, 2005. "Does Regulatory Capital Arbitrage, Reputation, or Asymmetric Information Drive Securitization?," Journal of Financial Services Research, Springer, vol. 28(1), pages 113-133, October.
  8. Duffee, Gregory R. & Zhou, Chunsheng, 2001. "Credit derivatives in banking: Useful tools for managing risk?," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 25-54, August.
  9. Elena Loutskina & Philip E. Strahan, 2009. "Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Originations," Journal of Finance, American Finance Association, vol. 64(2), pages 861-889, 04.
  10. Ashcraft, Adam B. & Schuermann, Til, 2008. "Understanding the Securitization of Subprime Mortgage Credit," Foundations and Trends(R) in Finance, now publishers, vol. 2(3), pages 191-309, June.
  11. Wagner, Wolf, 2007. "The liquidity of bank assets and banking stability," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 121-139, January.
  12. Avramov, Doron & Chordia, Tarun & Jostova, Gergana & Philipov, Alexander, 2009. "Dispersion in analysts' earnings forecasts and credit rating," Journal of Financial Economics, Elsevier, vol. 91(1), pages 83-101, January.
  13. Aaron Tornell & Frank Westermann, 2002. "Boom-Bust Cycles in Middle Income Countries: Facts and Explanation," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 111-155.
  14. Uhde, André & Michalak, Tobias C., 2010. "Securitization and systematic risk in European banking: Empirical evidence," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 3061-3077, December.
  15. Oikarinen, Elias, 2009. "Interaction between housing prices and household borrowing: The Finnish case," Journal of Banking & Finance, Elsevier, vol. 33(4), pages 747-756, April.
  16. Ashcraft, A. & Goldsmith-Pinkham, P. & Vickery, J., 2010. "MBS Ratings and the Mortgage Credit Boom," Discussion Paper 2010-89S, Tilburg University, Center for Economic Research.
  17. Markus K. Brunnermeier & Yuliy Sannikov, 2012. "A macroeconomic model with a financial sector," Working Paper Research 236, National Bank of Belgium.
  18. Boris Hofmann, 2001. "The determinants of private sector credit in industrialised countries: do property prices matter?," BIS Working Papers 108, Bank for International Settlements.
  19. Gerlach, Stefan & Peng, Wensheng, 2004. "Bank Lending and Property Prices in Hong Kong," CEPR Discussion Papers 4797, C.E.P.R. Discussion Papers.
  20. Raghuram G. Rajan, 2005. "Has financial development made the world riskier?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 313-369.
  21. Emmanuel Farhi & Jean Tirole, 2009. "Leverage and the Central Banker's Put," American Economic Review, American Economic Association, vol. 99(2), pages 589-93, May.
  22. Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 307-362, February.
  23. Krahnen, Jan Pieter & Wilde, Christian, 2006. "Risk transfer with CDOs and systemic risk in bankingfam," CFS Working Paper Series 2006/04, Center for Financial Studies (CFS).
  24. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  25. Peter M. DeMarzo, 2005. "The Pooling and Tranching of Securities: A Model of Informed Intermediation," Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 1-35.
  26. HyunSong Shin, 2009. "Securitisation and Financial Stability," Economic Journal, Royal Economic Society, vol. 119(536), pages 309-332, 03.
  27. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1449-1496, November.
  28. Krahnen, Jan Pieter & Wilde, Christian, 2006. "Risk Transfer with CDOs and Systemic Risk in Banking," CEPR Discussion Papers 5618, C.E.P.R. Discussion Papers.
  29. Cebenoyan, A. Sinan & Strahan, Philip E., 2004. "Risk management, capital structure and lending at banks," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 19-43, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Dwyer, Gerald P. & Lothian, James R., 2012. "International and historical dimensions of the financial crisis of 2007 and 2008," Journal of International Money and Finance, Elsevier, vol. 31(1), pages 1-9.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:31:y:2012:i:1:p:80-101. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.