Do European Banks with a Covered Bond Program issue Asset-Backed Securities for Funding?

Nils Boesel, Clemens Kool, Stefano Lugo

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

The decline in the issuance of asset-backed securities (ABSs) since the financial crisis and the comparative advantage of covered bonds (CBs) as a funding alternative to ABSs raise the question of whether banks still issue ABSs as a way to receive funding. By applying double-hurdle regression models to a dataset of 134 European banks observed during the period from 2007 to 2013, this study reveals that banks with a covered bond program (CBP) securitize, ceteris paribus, less of their assets. The estimated difference in ABS issuance is driven mainly by banks being more likely to issue ABSs as a funding tool rather than trying to manage their credit risk exposure or to meet regulatory capital requirements. Consistently, a worse liquidity/funding position results in higher levels of securitization only for banks without a CBP. (C) 2017 Elsevier Ltd. All rights reserved.

Original languageEnglish
Pages (from-to)76-87
Number of pages12
JournalJournal of International Money and Finance
Volume81
DOIs
Publication statusPublished - Mar 2018

JEL classifications

  • g21 - "Banks; Depository Institutions; Micro Finance Institutions; Mortgages"
  • g28 - Financial Institutions and Services: Government Policy and Regulation

Keywords

  • Securitization
  • Asset-backed securities
  • Covered bonds
  • Bank funding
  • Capital relief

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