Deposit Competition and Securitization

To Securitize or to Price Credit Risk?

“…Our work relates to two strands of literature. Prior research on the determinants of securitization highlights the importance of deposit funding costs (Pennacchi (1988), Gorton and Pennacchi (1995), Loutskina and Strahan (2009), McGowan and Nguyen (2021)), and corporate tax rates (Han et al (2015)). Loutskina (2011) shows that securitization enables banks to convert illiquid loans into liquid funds which improve their lending ability.…”