 Complexity and the default risk of mortgage-backed securitiesMonica Billio, Alfonso Dufour, Samuele Segato and Simone Varotto Journal of Banking & Finance, 2023, vol. 155, issue C Abstract: We study the impact that lower complexity in bank securitisations has on mortgage quality and the securitisation structure. We find that mortgages issued after the announcement of new European regulation that aims to reduce deal complexity are characterised by up to 0.38% lower annual delinquency rates than in the pre-regulation period. Similarly, we show that mortgage securitisations that meet the new ‘simplicity, transparency and standardisation’ (STS) criteria have 0.77% lower annual delinquency rates and are more resilient to adverse macro-economic shocks. We find that the increased quality of the underlying loans outweighs the potential negative effects of thinner subordinated tranches in securitisations that comply with the new regulation. Overall, our findings suggest that the new European securitisation regulation has contributed to improving credit quality in the securitisation market in Europe. Keywords: Asset-backed securities; STS securitisation; Residential mortgage-backed securities; Default risk; COVID-19 pandemic (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:155:y:2023:i:c:s0378426623001917 DOI: 10.1016/j.jbankfin.2023.106993 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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