Securitisation and Lending Standards: Evidence from the European Wholesale Loan Market
30 Pages Posted: 21 Mar 2011 Last revised: 27 Mar 2015
Date Written: March 26, 2015
Abstract
We assess the effect of securitization activity on banks’ loan pricing practices employing a uniquely detailed dataset from the euro-denominated syndicated loan market. We find that in the run up to the 2007-2009 crisis banks that were more active at originating asset-backed securities did not price their loans more aggressively (i.e. with narrower loan spreads) than non-active banks. Using a unique feature of our dataset, we show that within the set of loans which were already securitized, the amount of securitization activity by the originating bank was not related to lower loan spreads. Our results therefore suggest that broad credit cycle conditions correspond much stronger with looser credit standards (measured via price aggressiveness) than securitization activity.
Keywords: Securitisation, Bank Risk Taking, Syndicated Loans, Recent Financial Crisis
JEL Classification: G21, G28
Suggested Citation: Suggested Citation
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