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Do European banks with a covered bond program issue asset-backed securities for funding?

Author

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  • Boesel, Nils
  • Kool, Clemens
  • Lugo, Stefano

Abstract

The decline in the issuance of asset-backed securities (ABSs) since the financial crisis and the comparative advantage of covered bonds (CBs) as a funding alternative to ABSs raise the question of whether banks still issue ABSs as a way to receive funding. By applying double-hurdle regression models to a dataset of 134 European banks observed during the period from 2007 to 2013, this study reveals that banks with a covered bond program (CBP) securitize, ceteris paribus, less of their assets. The estimated difference in ABS issuance is driven mainly by banks being more likely to issue ABSs as a funding tool rather than trying to manage their credit risk exposure or to meet regulatory capital requirements. Consistently, a worse liquidity/funding position results in higher levels of securitization only for banks without a CBP.

Suggested Citation

  • Boesel, Nils & Kool, Clemens & Lugo, Stefano, 2018. "Do European banks with a covered bond program issue asset-backed securities for funding?," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 76-87.
  • Handle: RePEc:eee:jimfin:v:81:y:2018:i:c:p:76-87
    DOI: 10.1016/j.jimonfin.2017.11.011
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    References listed on IDEAS

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    More about this item

    Keywords

    Securitization; Asset-backed securities; Covered bonds; Bank funding; Capital relief;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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