International Finance Discussion Papers (IFDP)

Twitter Share RSS

November 2015

Securitization and Credit Quality

Alper Kara, David Marques-Ibanez, and Steven Ongena

Abstract:

Banks are usually better informed on the loans they originate than outside investors. As a result, securitized loans might be of lower credit quality than--otherwise similar--non-securitized loans. We assess the effect of securitization activity on credit quality employing a uniquely detailed dataset from the euro-denominated syndicated loan market. We find that, at issuance, banks do not select and securitize loans of lower credit quality. Following securitization, however, the credit quality of borrowers whose loans are securitized deteriorates by more than those in the control group. We find tentative evidence suggesting that poorer performance by securitized loans might be linked to banks' reduced monitoring incentives.

Keywords: Securitization, syndicated loans, credit risk

DOI: http://dx.doi.org/10.17016/IFDP.2015.1148

PDF: Full Paper

Back to Top
Last Update: June 19, 2020