Does a larger menu increase appetite? Collateral eligibility and credit supply

Bekkum, Sjoerd van ; Gabarro, Marc ; Irani, Rustom M.

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Document Type: Article
Year of publication: 2018
The title of a journal, publication series: The Review of Financial Studies
Volume: 31
Issue number: 3
Page range: 943-979
Place of publication: Cary, NC ; New York, NY
Publishing house: Oxford University Press
ISSN: 0893-9454 , 1465-7368
Publication language: English
Institution: Business School > ABWL u. Corporate Finance (Maug 2006-)
Subject: 330 Economics
Abstract: We examine a change in the European Central Bank’s collateral framework, which significantly lowered the rating requirement for eligible residential mortgage-backed securities (RMBS), and its impact on bank lending and risk-taking in the Netherlands. Banks most affected by the policy increase loan supply and lower interest rates on new mortgage originations. These lower-interest-rate loans serve as collateral for newly issued RMBS with lower-rated tranches and subsequently experience worse repayment performance. The performance deterioration is pronounced among loans with state guarantees, which suggests that looser collateral requirements may lead to undesired credit risk transfer to the sovereign.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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