Securitization and Credit Quality
Alper Kara (),
David Marques-Ibanez () and
Steven Ongena ()
No 1148, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)
Banks are usually better informed on the loans they originate than outside investors. As a result, securitized loans might be of lower credit quality than — otherwise similar — non-securitized loans. We assess the effect of securitization activity on credit quality employing a uniquely detailed dataset from the euro-denominated syndicated loan market. We find that, at issuance, banks do not select and securitize loans of lower credit quality. Following securitization, however, the credit quality of borrowers whose loans are securitized deteriorates by more than those in the control group. We find tentative evidence suggesting that poorer performance by securitized loans might be linked to banks’ reduced monitoring incentives.
Keywords: Securitization; syndicated loans; credit risk (search for similar items in EconPapers)
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http://www.federalreserve.gov/econresdata/ifdp/2015/files/ifdp1148.pdf Full text (application/pdf)
http://dx.doi.org/10.17016/IFDP.2015.1148 DOI (application/pdf)
Working Paper: Securitization and credit quality (2017)
Working Paper: Securitization and Credit Quality (2016)
Working Paper: Securitization and Credit Quality (2015)
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