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Determinants of European banks' engagement in loan securitization

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  • Hänsel, Dennis N.
  • Bannier, Christina E.

Abstract

We analyze collateralized loan obligation (CLO) transactions by European banks (1997 - 2004), trying to identify firm-specific and macroeconomic factors influencing an institution's securitization decision. CLO issuance seems to be an appropriate funding tool for large banks with high risk and low liquidity. However, risk transfer turns out to be limited in the extremes. Controlling for fixed effects, we find that fixed costs of securitization are surmountable also for smaller institutions. Interestingly, commercial banks seem to use loan securitization to access capital-market based businesses and the associated fee income. Regulatory capital arbitrage does not appear to have driven the market.

Suggested Citation

  • 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.
  • Handle: RePEc:zbw:bubdp2:7320
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    References listed on IDEAS

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    Cited by:

    1. Trujillo Ponce, Antonio & Samaniego Medina, Reyes & Cardone Riportella, Clara, 2009. "What do we know about banks securitisation? the spanish experience," DEE - Working Papers. Business Economics. WB wb093904, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    2. Deku, Solomon Y. & Kara, Alper & Marqués-Ibáñez, David, 2019. "Do reputable issuers provide better-quality securitizations?," Working Paper Series 2236, European Central Bank.
    3. Beccalli, Elena & Boitani, Andrea & Di Giuliantonio, Sonia, 2015. "Leverage pro-cyclicality and securitization in US banking," Journal of Financial Intermediation, Elsevier, vol. 24(2), pages 200-230.
    4. Michalak, Tobias C. & Uhde, André, 2012. "Credit risk securitization and bank soundness in Europe," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(3), pages 272-285.
    5. Zhang, Jinqing & Yin, Yiwen & Zhang, Linlin, 2019. "Determinants of loan securitization in Chinese banking: Cost-benefit-based analysis," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    6. Farruggio, Christian & Uhde, André, 2015. "Determinants of loan securitization in European banking," Journal of Banking & Finance, Elsevier, vol. 56(C), pages 12-27.
    7. Deku, Solomon Y. & Kara, Alper & Zhou, Yifan, 2019. "Securitization, bank behaviour and financial stability: A systematic review of the recent empirical literature," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 245-254.

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    More about this item

    Keywords

    Securitization; credit risk transfer; collateralized loan obligations;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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