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Good Securitization, Bad Securitization

Author

Listed:
  • Guillaume Plantin

    (Toulouse School of Economics and CEPR (E-mail: guillaume.plantin@tse-fr.eu))

Abstract

I use a simple banking model to study the circumstances under which excessive and inefficient securitization may occur. I first stress that increasing securitization rates that reduce banks' incentives to screen borrowers and thus lead to more defaults need not be inefficient. This may be an efficient response to higher gains from trade between banks and fixed-income markets in the presence of bank moral hazard. I then argue that if reaping such higher gains from trade induces a reduction in the informational efficiency of the securitization market, then there is room for excessive securitization. The model points at increased transparency and informational efficiency of the securitization market as key improvements for the future of the banking system.

Suggested Citation

  • Guillaume Plantin, 2011. "Good Securitization, Bad Securitization," IMES Discussion Paper Series 11-E-04, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:11-e-04
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    File URL: http://www.imes.boj.or.jp/research/papers/english/11-E-04.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Optimal securitization
      by Economic Logician in Economic Logic on 2011-04-12 19:06:00

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    Cited by:

    1. Pagès, Henri, 2013. "Bank monitoring incentives and optimal ABS," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 30-54.
    2. Gilles Chemla & Christopher A. Hennessy, 2014. "Skin in the Game and Moral Hazard," Post-Print hal-01457063, HAL.
    3. Gottardi, Piero & Maurin, Vincent & Monnet, Cyril, 2021. "Financial Fragility with Collateral Circulation," CEPR Discussion Papers 15757, C.E.P.R. Discussion Papers.
    4. repec:dau:papers:123456789/11540 is not listed on IDEAS
    5. Piero Gottardi & Vincent Maurin & Cyril Monnet, 2023. "Fragility of Secured Credit Chains," Diskussionsschriften dp2304, Universitaet Bern, Departement Volkswirtschaft.
    6. Matthew J. Botsch, 2022. "Public and Private Benefits of Information in Markets for Securitized Assets," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 48(3), pages 319-365, June.
    7. Gehrig, Thomas & Bester, Helmut & ,, 2012. "Loan Sales and Screening Incentives," CEPR Discussion Papers 9084, C.E.P.R. Discussion Papers.
    8. Cerasi, Vittoria & Rochet, Jean-Charles, 2014. "Rethinking the regulatory treatment of securitization," Journal of Financial Stability, Elsevier, vol. 10(C), pages 20-31.
    9. Chemla, Gilles & Hennessy, Christopher, 2011. "Privately versus Publicly Optimal Skin in the Game: Optimal Mechanism and Security Design," CEPR Discussion Papers 8403, C.E.P.R. Discussion Papers.
    10. Chemla, Gilles & Hennessy, Christopher, 2011. "Security Design: Signaling versus Speculative Markets," CEPR Discussion Papers 8336, C.E.P.R. Discussion Papers.
    11. repec:dau:papers:123456789/6311 is not listed on IDEAS

    More about this item

    Keywords

    banking; securitization; liquidity;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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