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The solvency of financial institutions in Spain: lessons from securitization

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  • C. L󰥺-Andi
  • A. Iglesias-Casal
  • M. C. L󰥺-Penabad
  • J. M. Maside-Sanfiz

Abstract

On analysing a sample of Spanish banks, we find that securitization has a slightly negative impact on the soundness of the issuing entity. An unbalanced dynamic panel model was estimated using the forward orthogonal deviations GMM method and used to analyse 537 traditional securitizations issued by 61 banks between 1998 and 2012. The analysis revealed that the entities' soundness became weaker immediately prior to the crisis, but this effect became insignificant after 2007. Securitization has facilitated a process of regulatory capital arbitrage leading to lower capital requirements while, at the same time, giving rise to a slight worsening of the quality of the originators' portfolios. It was found that profitability, liquidity and inflation positively affect solvency, while changes in short-term interest rates affect it negatively.

Suggested Citation

  • C. L󰥺-Andi & A. Iglesias-Casal & M. C. L󰥺-Penabad & J. M. Maside-Sanfiz, 2015. "The solvency of financial institutions in Spain: lessons from securitization," Applied Economics, Taylor & Francis Journals, vol. 47(44), pages 4741-4753, September.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:44:p:4741-4753
    DOI: 10.1080/00036846.2015.1034841
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    Cited by:

    1. Helder Ferreira de Mendonça & Vívian Íris Barcelos, 2021. "Securitization of assets and risk transfer in a large emerging market: Evidence from Brazil," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 580-605, October.

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