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Securitization and lending standards: evidence from the wholesale loan market

Steven Ongena (), Alper Kara () and David Marques-Ibanez ()

No 1362, Working Paper Series from European Central Bank

Abstract: We investigate the effect of securitization activity on banks’ lending standards using evidence from pricing behavior on the syndicated loan market. We find that banks more active at originating asset-backed securities are also more aggressive on their loan pricing practices. This suggests that securitization activity lead to laxer credit standards. Macroeconomic factors also play a large role explaining the impact of securitization activity on bank lending standards: banks more active in the securitization markets loosened more aggressively their lending standards in the run up to the recent financial crisis but also tightened more strongly during the crisis period. As a continuum of this paper we are examining whether individual loans that are eventually securitized are priced more aggressively by using unique European data on individual loans from all major trustees. JEL Classification: G21, G28

Keywords: bank risk taking; financial crisis; securitization; syndicated loans (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn and nep-ure
Note: 328790
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed

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