No. 1183 - Why do banks securitize their assets? Bank-level evidence from over one hundred countries in the pre-crisis period

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by Fabio Panetta and Alberto Franco Pozzolo July 2018

The use of securitization techniques by banks increased spectacularly in the decade before the financial crisis of 2008-09. It then dropped substantially. Focusing on the pre-crisis period, we analyse the characteristics of banks that made greater use of securitization techniques, the costs and benefits that they were facing, and the impact on credit supply and riskiness.

An analysis of a large sample of banks from over 100 countries shows that securitizations have been used mainly by large and profitable banks, with the objective of improving their capital ratios and reducing the cost of funding. With few exceptions, the banks that did securitize their assets reduced their credit and liquidity risks.