Bank Capital, Securitization and Credit Risk: an Empirical Evidence

Georges Dionne () and Tarek Harchaoui

MPRA Paper from University Library of Munich, Germany

Abstract: This paper is one of the first attempts to conduct an empirical investigation of the relationship between bank capital, securitization and bank risk-taking in a context of the rapid growth in off-balance-sheet activities. The data come from the Canadian financial sector. Evidence from the 1988-1998 period indicates that: (a) securitization has a negative statistical link with both current Tier 1 and Total risk-based capital ratios, and (b) there exists a positive statistical link between securitization and bank risk-taking. Profit-risk measure is more sensitive than loss-risk measure to the variation in securitization activity. These results seem to agree, during the studied period, with models indicating that banks might be induced to shift to more risky assets under the current capital requirements for credit risk because the regulatory capital levels are considered too high.

Keywords: Securitization; credit risk; capital regulation; Canadian financial sector; bank regulation. sector; bank regulation. (search for similar items in EconPapers)
JEL-codes: G1 G14 G21 G24 G28 (search for similar items in EconPapers)
Date: 2007, Revised 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published in Insurance and Risk Management, 4.75(2008): pp. 459-485

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/56693/1/MPRA_paper_56693.pdf original version (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:pra:mprapa:56693

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().