Securitization and Credit Quality

November 15, 2016

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Format: Chicago

David Marques-Ibanez. Securitization and Credit Quality, (USA: International Monetary Fund, 2016) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Banks are usually better informed on the loans they originate than other financial intermediaries. As a result, securitized loans might be of lower credit quality than otherwise similar nonsecuritized loans. We assess the effect of securitization activity on loans’ relative credit quality employing a uniquely detailed dataset from the euro-denominated syndicated loan market. We find that, at issuance, banks do not seem to 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.

Subject: Banking, Credit, Debt default, External debt, Financial crises, Financial institutions, Financial services, Loans, Money, Securitization

Keywords: Credit, Credit quality, Credit risk, Debt default, Europe, Loan characteristic, Loan issuance, Loan purpose, Loan securitization, Loans, Securitization, Securitized loan, Syndicated loans, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/221
Stock No:

WPIEA2016221
ISBN:

9781475553765
ISSN:

1018-5941

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