Nesrine Ben Salah and Hassouna Fedhila
– The purpose of this paper is to assess the effect of securitization on US bank lending and monetary policy transmission.
Abstract
Purpose
The purpose of this paper is to assess the effect of securitization on US bank lending and monetary policy transmission.
Design/methodology/approach
The authors use a sample of 174 US commercial banks from 2001 to 2008 and regress the ratio of total loans per total assets on variables related to securitization activity, variables related to bank-specific characteristics, economic growth and monetary policy, as well as interaction terms that are the product of this variable with securitization and bank-specific characteristics. GLS and SUR techniques are used.
Findings
The results show that a greater recourse to securitization is associated with an increase of US bank lending capacities. Furthermore, it makes banks (especially less liquid ones) less sensitive to a monetary tightening. The authors conclude that when securitization is used as a risk management tool, the efficacy of monetary actions is confirmed. However, when securitization is considered as a substitute for liquid assets, monetary actions become ineffective. So, an increase in federal rates cannot, in this case, affect bank lending.
Originality/value
The paper contributes to a better understanding of how securitization affects bank lending and the effectiveness of monetary policy. The volume of securitized assets should now be considered as a part of traditional liquidity measures.
Details
Keywords
Nesrine Bensalah and Hassouna Fedhila
The purpose of this paper is to investigate the reasons that urge US banks to securitize.
Abstract
Purpose
The purpose of this paper is to investigate the reasons that urge US banks to securitize.
Design/methodology/approach
The authors apply a logistic regression model to a sample of 5,394 observations. The dependent variable takes 1 if the bank securitizes and 0 if not. The authors use also, a Heckman selection model to account for the potential dependence between the decision to securitize and the decision of which assets to securitize.
Findings
The results indicate that liquidity, credit risk transfer, regulatory capital arbitrage and profitability are the most important factors that drive securitization in the USA. Moreover, the nature of the asset securitized appears to be dependent on the objective that the bank pursues. For funding and capital arbitrage objectives, the bank needs to securitize its mortgage loans. However, for credit risk transfer purposes, it has to opt for a non mortgage securitization. The nature of the asset securitized can thus, be used as a signal for bank’s intentions to securitize.
Originality/value
This study contributes to a better understanding of the reasons that urge banks to securitize. It also presents, using a Heckman selection procedure, a detailed analysis that discriminates between different types of securitization.