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Securitization and Credit Quality
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 ...
Securitization and lending standards: Evidence from the European wholesale loan market
We assess the effect of securitization activity on banks' lending rates employing a uniquely detailed dataset from the euro-denominated syndicated loan market. We find that, in the run up to the 2007-2009 crisis banks that were more active at originating asset-backed securities did not price their loans more aggressively (i.e. with narrower lending spreads) than less-active banks. Using a unique feature of our dataset, we show that also within the set of loans that were previously securitized, the relative level of securitization activity by the originating bank is not related to narrower ...