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Lending relationships and credit rationing: the impact of securitization

Santiago Carbo Valverde (), Hans Degryse () and Francisco Rodriguez-Fernandez
Authors registered in the RePEc Author Service: Francisco Rodríguez Fernández ()

No 9138, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Banks have been heavily involved in securitization. We study whether the involvedness of a firm’s main bank into different types of securitization activity -- asset backed securities (ABS) and covered bonds -- influences credit supply before and during the 2007-8 financial crisis. Both types of securitization allow the bank to generate liquidity. To the extent that ABS activity lowers lending standards in normal times, banks with more ABS activity may reduce their lending more in crisis times as an ex-post effect of a previously higher risk adoption. Employing a disequilibrium model to identify credit rationing, we find that a longer relationship with a firm’s main bank considerable improve credit supply. In general, we find that a relationship with a bank that is more involved in securitization activities relaxes credit constraints in normal periods. In contrast, while a relationship with a firm’s main bank that issues covered bonds reduces credit rationing during crisis periods, the issuance of asset backed securities by a firm’s main bank aggravates these firm’s credit rationing in crisis periods.

Keywords: financial crisis; lending relationships; securitization (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-ban and nep-ure
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Working Paper: Lending relationships and credit rationing: the impact of securitization (2011) Downloads
Working Paper: Lending Relationships and Credit Rationing: The Impact of Securitization (2011) Downloads
Working Paper: Lending relationships and credit rationing: the impact of securitization (2011) Downloads
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