Securitisation and banking risk: what do we know so far?
Aydin Ozkan and
Yener Altunbas ()
Review of Behavioral Finance, 2016, vol. 8, issue 1, 2-16
Purpose - – Bank securitisation is deemed to have been a major contributing factor to the 2007/2008 financial crises via fuelling credit growth accompanied by lower banks’ credit standards. Yet, prior to the crisis a common view was that securitisation activity makes the financial system more stable as risk was more easily diversified, managed and allocated economy-wide. The purpose of this paper is to review the extant literature to explore the so far generated knowledge on the impact of securitisation on banking risks. In particular, the authors examine the theoretical arguments and empirical studies on securitisation and banking risks before and after the global financial crisis of 2007/2008. Design/methodology/approach - – Review and discussion of the literature. Findings - – Theoretical literature univocally accentuate the undesirable consequences of securitisation, which may promote retention of riskier loans, undermine banks’ screening and monitoring incentives and enhance banks’ risk appetite. However, empirical evidence does not uniformly support the theoretical conclusions. If banks are securitisation active they lend more to risky borrowers, have less diversified portfolios and hold less capital, retain riskier loans and are aggressive in loan pricing. Others argue that securitisation reduces banks insolvency risk, increases profitability, provides liquidity and leads to greater supply of loans. Mortgage securitisation is an area where there is consistent evidence of bank risk taking via securitisation. Originality/value - – The paper identifies open issues for future research.
Keywords: Financial crisis; Bank risk taking; Securitization (search for similar items in EconPapers)
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
http://www.emeraldinsight.com/10.1108/RBF-07-2014- ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers
Working Paper: Securitisation and banking risk: What do we know so far? (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:v:8:y:2016:i:1:p:2-16
Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://emeraldgroupp ... /journals.htm?id=rbf
Access Statistics for this article
Review of Behavioral Finance is currently edited by Phil Holmes and Robert Hudson
More articles in Review of Behavioral Finance from Emerald Group Publishing
Bibliographic data for series maintained by Virginia Chapman ().