Securitisation and Lending Standards: Evidence from the European Wholesale Loan Market

30 Pages Posted: 21 Mar 2011 Last revised: 27 Mar 2015

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: 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

Kara, Alper and Marques-Ibanez, David and Ongena, Steven R. G., Securitisation and Lending Standards: Evidence from the European Wholesale Loan Market (March 26, 2015). Available at SSRN: https://ssrn.com/abstract=1787595 or http://dx.doi.org/10.2139/ssrn.1787595

Alper Kara

Brunel University London ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

University of Huddersfield - Business School ( email )

David Marques-Ibanez (Contact Author)

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

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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