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Good Securitization, Bad Securitization

Author

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  • Guillaume Plantin

    (UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse, Tepper School of Business - CMU - Carnegie Mellon University [Pittsburgh])

Abstract

I use a simple banking model to study the circumstances under which excessive and inefficient securitization may occur. I first stress that increasing securitization rates that reduce banks' incentives to screen borrowers and thus lead to more defaults need not be inefficient. This may be an efficient response to higher gains from trade between banks and fixed-income markets in the presence of bank moral hazard. I then argue that if reaping such higher gains from trade induces a reduction in the informational efficiency of the securitization market, then there is room for excessive securitization. The model points at increased transparency and informational efficiency of the securitization market as key improvements for the future of the banking system.

Suggested Citation

  • Guillaume Plantin, 2011. "Good Securitization, Bad Securitization," Working Papers hal-03476052, HAL.
    • Handle: RePEc:hal:wpaper:hal-03476052
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03476052
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    Citations

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    Cited by:

    1. Pagès, Henri, 2013. "Bank monitoring incentives and optimal ABS," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 30-54.
    2. Piero Gottardi & Vincent Maurin & Cyril Monnet, 2023. "Fragility of Secured Credit Chains," Diskussionsschriften dp2304, Universitaet Bern, Departement Volkswirtschaft.
    3. Matthew J. Botsch, 2022. "Public and Private Benefits of Information in Markets for Securitized Assets," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 48(3), pages 319-365, June.
    4. Gilles Chemla & Christopher A. Hennessy, 2014. "Skin in the Game and Moral Hazard," Post-Print hal-01457063, HAL.
    5. repec:dau:papers:123456789/11540 is not listed on IDEAS
    6. Gottardi, Piero & Maurin, Vincent & Monnet, Cyril, 2021. "Financial Fragility with Collateral Circulation," CEPR Discussion Papers 15757, C.E.P.R. Discussion Papers.

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