Do European banks with a covered bond program issue asset-backed securities for funding?

Nils Boesel, Clemens Kool, Stefano Lugo*

*Corresponding author for this work

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.

Original languageEnglish
Pages (from-to)76-87
Number of pages12
JournalJournal of International Money and Finance
Volume81
DOIs
Publication statusPublished - 1 Mar 2018

Keywords

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

Fingerprint

Dive into the research topics of 'Do European banks with a covered bond program issue asset-backed securities for funding?'. Together they form a unique fingerprint.

Cite this