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Securitization, Bank Regulation, and the Macroeconomy

Author

Listed:
  • Kul B. Luintel

    (Cardiff Business School, Cardiff University)

  • Jose L. Torres

    (Department of Economics, University of Malaga)

Abstract

We develop a general equilibrium framework in which a commercial banker constrained by capital adequacy requirements creates a special purpose vehicle (SPV) to hold securitized assets off its balance sheet. By separating the bank and SPV, the banker circumvents regulation, creating a gap between statutory and effective capital ratios. The model incorporates loan-to-value and collateral constraints with credit risk to examine interactions between financial and real sectors over the business cycle. Securitization is expansionary, increases off-balance-sheet lending under tighter regulation, amplifies credit risk, and raises welfare in the steady state.

Suggested Citation

  • Kul B. Luintel & Jose L. Torres, 2026. "Securitization, Bank Regulation, and the Macroeconomy," Cardiff Economics Working Papers E2026/2, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2026/2
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G2 - Financial Economics - - Financial Institutions and Services

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