Securitization and lending standards: Evidence from the European wholesale loan market

Kara, Alper; Marqués-Ibáñez, David; Ongena, Steven

doi:10.1016/j.jfs.2016.07.004

Cited by 43 publications

(18 citation statements)

References 90 publications

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“…The euro‐denominated collateralized loan obligations (CLO) market, is a good laboratory to assess the impact of securitization on credit quality on an alternative institutional setting as there are significant differences between the US and European securitization markets. Firstly, the growth of European securitization has been relatively recent and swift (Kara, Marques‐Ibanez, & Ongena, ). It started timidly in the late 1990s and developed significantly only from 2004 to 2007.…”

Section: Introductionmentioning

confidence: 99%

Securitization and credit quality in the European market

Kara

Marqués-Ibáñez

Ongena

2018

Euro Fin Management

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We assess the effect of securitization activity on relative credit quality employing a uniquely detailed dataset from the euro‐denominated syndicated loan market. We find that at issuance, based on observable characteristics, banks do not seem to select and securitize loans of lower credit quality. Following securitization, the credit quality of borrowers whose loans are securitized deteriorates more than those in the control group. We find that poorer performance by borrowers of securitized loans seems to be connected to banks’ reduced monitoring incentives. Our results are supported by two additional methodologies and robust to controlling for predetermined borrower–lender matching.

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Section: Introductionmentioning

confidence: 99%

Securitization and credit quality in the European market

Kara

Marqués-Ibáñez

Ongena

2018

Euro Fin Management

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“…Second, we measure bank risk using the stock market tail risk of the originators. Various papers (e.g., Kara et al, 2016;Casu et al, 2013;Michalak and Uhde, 2012;Loutskina, 2011) use accounting information (as NPL, Z-score, etc): although these measures are available for both listed and non-listed banks, these measures are backward looking. A second group of papers (e.g., Iglesias-Casal et al, 2016;Battaglia et al, 2014, Nijiskens andWagner, 2011;Battaglia and Gallo, 2013;Gorton and Metrick, 2012;Berger et al, 2015) use stock market returns to capture market risk (both in terms of systematic and systemic risks).…”

Section: [Insert Figure One About Here] [Insert Figure Two About Here]mentioning

confidence: 99%

“…Most securitization papers have focused on the U.S. (e.g., Casu et al, 2013;Loutskina and Strahan, 2009;Loutskina, 2011;Miam and Sufi, 2009;Chava and Purnanandam, 2011;Dell'Ariccia et al, 2012;Gorton and Metrick, 2012;Jiangli and Pritsker, 2008;Keys et al, 2010;Le et al, 2016;Wu et al, 2010;Trapp and Weiß, 2016); and there is only a handful of papers analyzing the link between securitization and risk in Europe (e.g., Kara et al, 2016;Michalak and Uhde, 2012;Farruggio and Uhde, 2015;Hansel and Krahnen, 2007;Franke and Krahnen, 2006).…”

Section: [Insert Figure One About Here] [Insert Figure Two About Here]mentioning

confidence: 99%

Securitization and crash risk: Evidence from large European banks

Battaglia

Buchanan

Fiordelisi

et al. 2021

Journal of International Financial Markets, Institutions and Mo

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The 2008 global financial crisis highlights the importance of securitization and crash risk. Yet there is a dearth of papers exploring the link between securitization and crash risk. We analyze 7,096 securitization deals made by large European listed banks between 2000 and 2017. Our paper provides evidence that bank risk declines in the year of the securitization and increases in the following year. We also show that this effect is driven by low-risk securitization deals. We use a dynamic panel data approach to establish a causal relationship and control the robustness of our results by using different tail risk measures (such as crash risk, value at risk, and expected shortfall). We also show that the risk reduction effect is weaker in crisis periods relative to normal times. Our findings have policy implications as regulators attempt to revive European securitization markets.

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“…First, unlike the US, where the Government Sponsored Enterprises (such as the Freddie Mac and Fannie Mae) are dominant market players, there is limited government involvement in the European market, which is purely driven by private institutions. Secondly, even though the US securitization market has been active since the late 1960s, the development of the European market has been relatively recent and has been attributed to the introduction of the Euro in the late 1990s (Altunbas et al 2009;Kara et al 2016). Against this backdrop, investors may have been exposed to higher information asymmetries.…”

Section: Introductionmentioning

confidence: 99%

The predictive strength of MBS yield spreads during asset bubbles

Deku

Kara

Semeyutin

2020

Rev Quant Finan Acc

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We examine whether the predictive power of initial yield spreads of mortgage-backed securities (MBS) vary with the financial cycle. Using a crosscountry sample of 4203 MBS, we find that initial yield spreads of MBS incorporate more information than credit ratings and predict future downgrades, even after conditioning on initial credit ratings. Predictive power of spreads is higher during credit and housing bubbles and for the least risky AAArated MBS. We find that initial yield spreads capture the magnitude of rating downgrades, especially during asset bubble periods. As a novel approach in this literature, we also utilise machine learning techniques (regression trees, naïve Bayes, support vector machines and random forests) to confirm our results.

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Securitization and lending standards: Evidence from the European wholesale loan market

Cited by 43 publications

References 90 publications

Securitization and credit quality in the European market

Securitization and credit quality in the European market

Securitization and crash risk: Evidence from large European banks

The predictive strength of MBS yield spreads during asset bubbles

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