Determinants and Risk Implications of Financial Asset Securitization Activities Engaged by Originators: Evidence from U.S. Bank Holding Companies
Date Issued
2006
Date
2006
Author(s)
Chen, Weitzu
DOI
en-US
Abstract
Financial asset securitization in the U.S. has been expanding in tremendous pace since its inception in 1970. The creation of innovative structures of securitization provides banks with a new avenue to operate businesses by breaking the vertically integrated intermediation process into distinct steps. In contrast to their traditional role as intermediaries between borrowers and investors, banks can evaluate which steps in the securitization process they possess the competitive advantage and focus on a limited number of roles. For exploring the originating banks’ behavior on securitization, this study investigates two related issues – determinants and risk implications of securitization activities – by using a sample of U.S. bank holding companies from 2001 to 2004.
First, in view of the current and potential growth of securitization, whether to engage in securitization and on what extent have been becoming the important policy choices faced by banks. A number of key factors are examined for the determinants of banks’ securitization decision. Results from tobit estimations reveal that capital constraints, scale economies, funding and liquidity, and enhanced income drive banks’ use of securitization.
Second, a net risk transfer occurs when a securitization transfers more risk than economic resources. To investigate the impact of securitization on next quarter’s bank risk, this study performs total risk and priced risk tests. Regression results show that both risks are increased after securitization. Thus, risk decreases from diversified asset portfolio are outweighed by risk increases from credit enhancement and moral recourse provided by originating banks. Net risk transfer does not occur even economic resources are transferred off the originators’ books.
Subjects
金融資產證券化
創始機構
決定因素
風險意涵
Financial Asset Securitization
Originating Banks
Determinants
Risk Implications
Type
other
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