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Are covered bonds a substitute for mortgage-backed securities?

Author

Listed:
  • Santiago Carbó-Valverde
  • Richard J. Rosen
  • Francisco Rodríguez-Fernández

Abstract

Given the problems in the mortgage-backed securities (MBS) market during the financial crisis, some suggest that covered bonds (CB) might be a substitute for MBS. This could lead to a number of policy alternatives in countries where regulation and business have been mainly leaning to one of these types of securities. Examining the use of CB and MBS in the U.S. and Europe, we find that the two often seem to be used for different purposes. Banks are more likely to use CB when they have liquidity needs while MBS are associated with risk management and agency problems. Introducing MBS to markets where only CB are common or CB to markets where only MBS are common could have large effects.

Suggested Citation

  • Santiago Carbó-Valverde & Richard J. Rosen & Francisco Rodríguez-Fernández, 2017. "Are covered bonds a substitute for mortgage-backed securities?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 20(3), pages 238-253, July.
  • Handle: RePEc:taf:jpolrf:v:20:y:2017:i:3:p:238-253
    DOI: 10.1080/17487870.2017.1293537
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    References listed on IDEAS

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    Cited by:

    1. Ahnert, Toni & Anand, Kartik & Gai, Prasanna & Chapman, James, 2015. "Safe, or not safe? Covered bonds and Bank Fragility," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112875, Verein für Socialpolitik / German Economic Association.
    2. repec:bla:ecinqu:v:57:y:2019:i:1:p:391-409 is not listed on IDEAS
    3. Golden, Brian & Maqui, Eduardo, 2018. "How 'special' are international banks sponsoring Irish-resident SPEs?," Research Technical Papers 14/RT/18, Central Bank of Ireland.
    4. repec:eee:riibaf:v:48:y:2019:i:c:p:32-47 is not listed on IDEAS
    5. repec:eee:jimfin:v:81:y:2018:i:c:p:76-87 is not listed on IDEAS
    6. repec:eee:finmar:v:39:y:2018:i:c:p:84-110 is not listed on IDEAS
    7. Carbo-Valverde, Santiago & Degryse, Hans & Rodríguez-Fernández, Francisco, 2015. "The impact of securitization on credit rationing: Empirical evidence," Journal of Financial Stability, Elsevier, vol. 20(C), pages 36-50.

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