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Securitization and Lending

  • Andrada BilanEmail author
  • Hans Degryse
  • Kuchulain O’Flynn
  • Steven Ongena
Chapter
Part of the Palgrave Macmillan Studies in Banking and Financial Institutions book series (SBFI)

Abstract

In this chapter, we address the impact on the loan amount that the phenomenon of loan securitization has had. Securitization implies that financial intermediaries that grant illiquid loans subsequently pool them together, diversifying risks and converting them into liquid assets or asset-backed securities (ABSs). These assets are then sold to outside investors, in exchange for wholesale funding. A liquid market for securitized assets has recognized benefits for the banking industry, such as improving risk-sharing and reducing banks’ cost of capital. But securitization can also spur risk-taking. We review the theories and estimates put forward in the recent banking literature to quantify these benefits and costs of securitization on the volume and the quality of credit.

Keywords

Banks Lending Securitization Information frictions Monetary policy Bank regulation Global financial crisis 

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Andrada Bilan
    • 1
    Email author
  • Hans Degryse
    • 2
  • Kuchulain O’Flynn
    • 1
  • Steven Ongena
    • 1
  1. 1.Department of Banking and FinanceUniversity of ZurichZürichSwitzerland
  2. 2.Faculty of Economics and BusinessKatholieke University of LeuvenLeuvenBelgium

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