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Retained interests in securitisations and implications for bank solvency

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  • Sarkisyan, Anna
  • Casu, Barbara

Abstract

Using US bank holding company data for the period 2001 to 2007, this paper examines the relationship between banks' retained interests in securitisations and insolvency risk. We find that the provision of credit enhancements and guarantees significantly increases bank insolvency risk, albeit this varies for different levels of securitisation outstanding. Specifically, retained interests increase insolvency risk for JEL Classification: G21, G32

Suggested Citation

  • Sarkisyan, Anna & Casu, Barbara, 2013. "Retained interests in securitisations and implications for bank solvency," Working Paper Series 1538, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20131538
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1538.pdf
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    Cited by:

    1. Katerina Ivanov, 2021. "Credit Enhancement Mechanism in Loan Securitization and Its Implication to Systemic Risk," Discussion Paper Series 2021-01, McColl School of Business, Queens University of Charlotte.
    2. Emre Kilic & Gerald Lobo & Tharindra Ranasinghe & Lin Yi, 2021. "Strategic usefulness of ignorance: evidence from income smoothing via retained interest of securitized loans," Review of Quantitative Finance and Accounting, Springer, vol. 56(1), pages 245-272, January.

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    More about this item

    Keywords

    insolvency risk; retained interests; securitisation;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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