Does Regulatory Capital Arbitrage, Reputation, or Asymmetric Information Drive Securitization? Export

@article{2005_AmbroseLaCourLittleSanders, abstract = {Banks can choose to keep loans on balance sheet as private debt or transform them into public debt via asset securitization. Securitization transfers credit and interest rate risk, increases liquidity, augments fee income, and improves capital ratios. Yet many lenders still retain a portion of their loans in portfolio. Do lenders exploit asymmetric information to sell riskier loans into the public markets or retain riskier loans in portfolio? If riskier loans are indeed retained in portfolio, is this motivated by regulatory capital incentives (regulatory capital arbitrage), or a concern for reputation? We examine these questions empirically and find that securitized mortgage loans have experienced lower ex-post defaults than those retained in portfolio, providing evidence consistent with either the capital arbitrage or reputation explanation for securitization.}, author = {Ambrose, Brent and Lacour-Little, Michael and Sanders, Anthony}, citeulike-article-id = {405871}, citeulike-linkout-0 = {http://dx.doi.org/10.1007/s10693-005-4358-2}, citeulike-linkout-1 = {http://www.ingentaconnect.com/content/klu/fina/2005/00000028/F0030001/00004358}, doi = {10.1007/s10693-005-4358-2}, issn = {0920-8550}, journal = {Journal of Financial Services Research}, keywords = {banks, basel, capital, consumer, credit, debt, mortgage, regulation, securitization}, month = {October}, number = {1-3}, pages = {113--133}, posted-at = {2006-09-04 13:30:02}, priority = {0}, publisher = {Kluwer Academic Publishers}, title = {Does Regulatory Capital Arbitrage, Reputation, or Asymmetric Information Drive Securitization?}, url = {http://dx.doi.org/10.1007/s10693-005-4358-2}, volume = {28}, year = {2005} }

TY - JOUR ID - 2005_AmbroseLaCourLittleSanders L3 - citeulike-article-id:405871 N2 - Banks can choose to keep loans on balance sheet as private debt or transform them into public debt via asset securitization. Securitization transfers credit and interest rate risk, increases liquidity, augments fee income, and improves capital ratios. Yet many lenders still retain a portion of their loans in portfolio. Do lenders exploit asymmetric information to sell riskier loans into the public markets or retain riskier loans in portfolio? If riskier loans are indeed retained in portfolio, is this motivated by regulatory capital incentives (regulatory capital arbitrage), or a concern for reputation? We examine these questions empirically and find that securitized mortgage loans have experienced lower ex-post defaults than those retained in portfolio, providing evidence consistent with either the capital arbitrage or reputation explanation for securitization. IS - 1-3 JF - Journal of Financial Services Research SN - 0920-8550 EP - 133 TI - Does Regulatory Capital Arbitrage, Reputation, or Asymmetric Information Drive Securitization? PB - Kluwer Academic Publishers VL - 28 SP - 113 KW - banks KW - basel KW - capital KW - consumer KW - credit KW - debt KW - mortgage KW - regulation KW - securitization AU - Ambrose, Brent AU - Lacour-Little, Michael AU - Sanders, Anthony PY - 2005/10// UR - http://dx.doi.org/10.1007/s10693-005-4358-2 ER -