The effect of securitization on US bank lending and monetary policy transmission. Issue 2 (27th May 2014)

• Record Type: Journal Article
• Authors: Ben Salah, Nesrine; Fedhila, Hassouna
• Is Part Of: Studies in economics and finance. Volume 31:Issue 2(2014)
• Page Start: 168
• Page End: 185
• Publication Date: 2014-05-27
• Subjects: Monetary policy -- Bank lending -- Credit risk transfer -- Securitization; Economics -- Periodicals; Finance -- Periodicals; 330
• DOI: 10.1108/SEF-12-2012-0140
• Languages: English
• ISSNs: 1086-7376

Abstract

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.