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Securitization and Credit Quality

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  • Kara, Alper

    () (Loughborough University)

  • Marques-Ibanez, David

    () (Board of Governors of the Federal Reserve System (U.S.))

  • Ongena, Steven

    () (University of Zürich)

Abstract

Banks are usually better informed on the loans they originate than outside investors. As a result, securitized loans might be of lower credit quality than — otherwise similar — non-securitized loans. We assess the effect of securitization activity on credit quality employing a uniquely detailed dataset from the euro-denominated syndicated loan market. We find that, at issuance, banks do not select and securitize loans of lower credit quality. Following securitization, however, the credit quality of borrowers whose loans are securitized deteriorates by more than those in the control group. We find tentative evidence suggesting that poorer performance by securitized loans might be linked to banks’ reduced monitoring incentives.

Suggested Citation

  • Kara, Alper & Marques-Ibanez, David & Ongena, Steven, 2015. "Securitization and Credit Quality," International Finance Discussion Papers 1148, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgif:1148
    DOI: 10.17016/IFDP.2015.1148
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    Cited by:

    1. Ugo Albertazzi & Margherita Bottero & Leonardo Gambacorta & Steven Ongena, 2016. "Asymmetric information and the securitization of SME loans," Temi di discussione (Economic working papers) 1091, Bank of Italy, Economic Research and International Relations Area.
    2. repec:iaf:journl:y:2017:i:2:p:91-98 is not listed on IDEAS
    3. Krahnen, Jan Pieter & Wilde, Christian, 2017. "Skin-in-the-game in ABS transactions: A critical review of policy options," SAFE White Paper Series 46, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.

    More about this item

    Keywords

    Securitization; syndicated loans; credit risk;

    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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