Securitization, Bank Regulation, and the Macroeconomy

Kul B. Luintel () and Jose Torres ()
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Kul B. Luintel: Cardiff Business School, Cardiff University

No E2026/2, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: We develop a general equilibrium framework in which a commercial banker constrained by capital adequacy requirements creates a special purpose vehicle (SPV) to hold securitized assets off its balance sheet. By separating the bank and SPV, the banker circumvents regulation, creating a gap between statutory and effective capital ratios. The model incorporates loan-to-value and collateral constraints with credit risk to examine interactions between financial and real sectors over the business cycle. Securitization is expansionary, increases off-balance-sheet lending under tighter regulation, amplifies credit risk, and raises welfare in the steady state.

Keywords: Financial crisis; securitization; special purpose vehicles; DSGE models; credit risk (search for similar items in EconPapers)
JEL-codes: E32 E44 G2 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2026-03
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-mac and nep-rmg
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