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Securitization and lending standards: Evidence from the European wholesale loan market


Ongena, Steven; Kara, Aper; Marques-Ibanez, David (2016). Securitization and lending standards: Evidence from the European wholesale loan market. Journal of Financial Stability, 26:107-127.

Abstract

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 lending spreads. Our results suggest that while the credit cycle seems to have a major impact of lending standards, the effect of securitization activity appears to be very limited.

Abstract

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 lending spreads. Our results suggest that while the credit cycle seems to have a major impact of lending standards, the effect of securitization activity appears to be very limited.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:October 2016
Deposited On:25 Jan 2017 10:46
Last Modified:26 Jan 2017 04:09
Publisher:Elsevier
ISSN:1572-3089
Publisher DOI:https://doi.org/10.1016/j.jfs.2016.07.004
Related URLs:http://www.sciencedirect.com/science/article/pii/S1572308916300572?np=y (Publisher)
Other Identification Number:merlin-id:13504

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Filetype: PDF - Registered users only until 1 November 2019
Size: 594kB
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Embargo till: 2019-11-01

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