Securitization and Lending Standards: Evidence from the Wholesale Loan Market

European Banking Center Discussion Paper No. 2011-020

CentER Working Paper Series No. 2011-081

35 Pages Posted: 22 Jul 2011

See all articles by Alper Kara

Alper Kara

Brunel University London; University of Huddersfield - Business School

David Marques-Ibanez

European Central Bank (ECB)

Steven Ongena

University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Date Written: July 20, 2011

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.

Keywords: securitization, bank risk taking, syndicated loans, financial crisis

JEL Classification: G21, G28

Suggested Citation

Kara, Alper and Marques-Ibanez, David and Ongena, Steven R. G., Securitization and Lending Standards: Evidence from the Wholesale Loan Market (July 20, 2011). European Banking Center Discussion Paper No. 2011-020, CentER Working Paper Series No. 2011-081, Available at SSRN: https://ssrn.com/abstract=1891760 or http://dx.doi.org/10.2139/ssrn.1891760

Alper Kara

Brunel University London ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

University of Huddersfield - Business School ( email )

David Marques-Ibanez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
49 6913 44 6460 (Phone)
49 6913 44 6460 (Fax)

Steven R. G. Ongena (Contact Author)

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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