Securitization and Lending Standards: Evidence from the Wholesale Loan Market

A. Kara, D. Marques-Ibanez, S. Ongena

Research output: Working paperDiscussion paperOther research output

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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.
Original languageEnglish
Place of PublicationTilburg
PublisherEBC
Volume2011-020
Publication statusPublished - 2011

Publication series

NameEBC Discussion Paper
Volume2011-020

Fingerprint

Loans
Lending
Securitization
Bank lending
Loan pricing
Financial crisis
Asset-backed securities
Macroeconomic factors
Syndicated loans
Pricing behaviour
Credit

Keywords

  • securitization
  • bank risk taking
  • syndicated loans
  • financial crisis

Cite this

Kara, A., Marques-Ibanez, D., & Ongena, S. (2011). Securitization and Lending Standards: Evidence from the Wholesale Loan Market. (EBC Discussion Paper; Vol. 2011-020). Tilburg: EBC.
Kara, A. ; Marques-Ibanez, D. ; Ongena, S. / Securitization and Lending Standards : Evidence from the Wholesale Loan Market. Tilburg : EBC, 2011. (EBC Discussion Paper).
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Kara, A, Marques-Ibanez, D & Ongena, S 2011 'Securitization and Lending Standards: Evidence from the Wholesale Loan Market' EBC Discussion Paper, vol. 2011-020, EBC, Tilburg.

Securitization and Lending Standards : Evidence from the Wholesale Loan Market. / Kara, A.; Marques-Ibanez, D.; Ongena, S.

Tilburg : EBC, 2011. (EBC Discussion Paper; Vol. 2011-020).

Research output: Working paperDiscussion paperOther research output

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AB - 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.

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Kara A, Marques-Ibanez D, Ongena S. Securitization and Lending Standards: Evidence from the Wholesale Loan Market. Tilburg: EBC. 2011. (EBC Discussion Paper).