Risk retention in the European securitization market: skimmed by the skin-in-the-game methods?
Vivian M. van Breemen,
Claudia Schwarz and
Dennis Vink
No 2837, Working Paper Series from European Central Bank
Abstract:
We empirically investigated the impact of regulatory risk retention methods on credit ratings and pricing at issuance using a sample of European securitization tranches issued in the period 2011-2021. European regulation is based on the assumption that all risk retention methods homogenously align incentives and interests between originators and investors. We investigated the impact of these methods on the pricing of securitization tranches and found that investors adjust the risk premium at issuance for tranches based on different risk retention methods. We also found that credit ratings (discrepancy) differed depending on the risk retention method used. Finally, we gained a deeper insight into the risk retention methods chosen over time and concluded that originators take deal complexity and capital relief characteristics into consideration when selecting a specific method. JEL Classification: G12, G21, G24, G28
Keywords: credit ratings; primary issuance spread; risk retention rule (search for similar items in EconPapers)
Date: 2023-08
New Economics Papers: this item is included in nep-ban, nep-eec and nep-rmg
Note: 1598185
References: View complete reference list from CitEc
Citations:
Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2837~d80ed358c0.en.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20232837
Access Statistics for this paper
More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().