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Do European banks with a covered bond program issue asset-backed securities for funding?

Nils Boesel, Clemens Kool () and Stefano Lugo ()

Journal of International Money and Finance, 2018, vol. 81, issue C, 76-87

Abstract: The decline in the issuance of asset-backed securities (ABSs) since the financial crisis and the comparative advantage of covered bonds (CBs) as a funding alternative to ABSs raise the question of whether banks still issue ABSs as a way to receive funding. By applying double-hurdle regression models to a dataset of 134 European banks observed during the period from 2007 to 2013, this study reveals that banks with a covered bond program (CBP) securitize, ceteris paribus, less of their assets. The estimated difference in ABS issuance is driven mainly by banks being more likely to issue ABSs as a funding tool rather than trying to manage their credit risk exposure or to meet regulatory capital requirements. Consistently, a worse liquidity/funding position results in higher levels of securitization only for banks without a CBP.

Keywords: Securitization; Asset-backed securities; Covered bonds; Bank funding; Capital relief (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:jimfin:v:81:y:2018:i:c:p:76-87