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Banks' Capital, Securitization and Credit Risk: An Empirical for Canada

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  • Dionne, Georges
  • Harchaoui, Tarek M.

Abstract

This paper is the first attempt that empirically investigates the relationship between banks capital, securitization and risk in the context of the rapid growth of off-balance-sheet activities in the Canadian financial sector. The evidence over the 1988-1998 period indicates that a) securitization has negative effects on both Tier 1 and Total risk-based capital ratios, and b) there exists a positive statistical link between securitization and banks' risk. These results seem to accord with Kim and Santomero (1988) who concluded that banks might be induced to shift to more risky assets under the current capital requirements for credit risk.

Suggested Citation

  • Dionne, Georges & Harchaoui, Tarek M., 2003. "Banks' Capital, Securitization and Credit Risk: An Empirical for Canada," Cahiers de recherche 0311, CIRPEE.
    • Handle: RePEc:lvl:lacicr:0311
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    References listed on IDEAS

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    12. repec:bla:jfinan:v:43:y:1988:i:5:p:1219-33 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Georges Dionne, 2003. "The Foundations of Banks' Risk Regulation: a Review of the Literature," Cahiers de recherche 0346, CIRPEE.
    2. Omneya Abdelsalam & Marwa Elnahass & Sabur Mollah, 2018. "Asset Securitization and Risk: Does Bank Type Matter?," Working Papers 2018-15, Swansea University, School of Management.
    3. Hänsel, Dennis N. & Bannier, Christina E., 2008. "Determinants of European banks' engagement in loan securitization," Discussion Paper Series 2: Banking and Financial Studies 2008,10, Deutsche Bundesbank.
    4. Affinito, Massimiliano & Tagliaferri, Edoardo, 2010. "Why do (or did?) banks securitize their loans? Evidence from Italy," Journal of Financial Stability, Elsevier, vol. 6(4), pages 189-202, December.
    5. Altunbas, Yener & Gambacorta, Leonardo & Marques-Ibanez, David, 2009. "Securitisation and the bank lending channel," European Economic Review, Elsevier, vol. 53(8), pages 996-1009, November.
    6. Sami Ben Naceur & Magda Kandil, 2013. "Has the Basel Capital Requirement Caused Credit Crunch in the Mena Region?," Middle East Development Journal, Taylor & Francis Journals, vol. 5(2), pages 1350014-131, January.
    7. An, Ping & Yu, Mengxuan, 2018. "Neglected part of shadow banking in China," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 211-236.
    8. Sarkisyan, Anna & Casu, Barbara, 2013. "Retained interests in securitisations and implications for bank solvency," Working Paper Series 1538, European Central Bank.
    9. PRAO YAO Seraphin & Kamalan Eugène, 2018. "Bank Capital and Credit Supply in Ivory Coast: Evidence from an ARDLBounds Testing Approach," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 4(5), pages 99-106, 05-2018.
    10. John Krainer & Elizabeth Laderman, 2014. "Mortgage Loan Securitization and Relative Loan Performance," Journal of Financial Services Research, Springer;Western Finance Association, vol. 45(1), pages 39-66, February.
    11. Krzysztof Jackowicz, 2010. "About motives behind Securitization and its Implications: An Overview of Empirical Findings," Contemporary Economics, Vizja University, vol. 4(1), March.
    12. Duran, Miguel A. & Lozano-Vivas, Ana, 2013. "Off-balance-sheet activity under adverse selection: The European experience," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 176-190.

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    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • 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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