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Competition and bank risk: the effect of securitization and bank capital

Yener Altunbas (), Michiel Van Leuvensteijn and David Marques-Ibanez ()

No 1678, Working Paper Series from European Central Bank

Abstract: We find that the increased use of securitisation activity in the banking sector prior to the 2007- 2009 crisis augmented the effect of competition on realised bank risk (i.e. more intense competition and greater use of securitisation is correlated with higher levels of realised risk) during the crisis. In contrast, higher levels of capital did not buffer the impact of competition on realised risk. It follows that cooperation between supervisory and competition authorities is warranted to account for the stability implications of financial innovation and capital regulation. JEL Classification: G21, D22

Keywords: bank risk; competition; securitisation (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-ban and nep-com
Note: 328790
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