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Dis-integrating credit markets: diversification, securitization, and lending in a recovery

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  • Chavaz, Matthieu

    (Bank of England)

Abstract

Using exogenous variation in exposure to hurricanes, this article explores how differently diversified US banks lend during the protracted recovery from a major downturn. Compared to diversified banks, local banks (i) originate a higher share of new mortgage and small business loans in affected areas, but (ii) sell a higher share of the new mortgages into the secondary market. These results suggest a pattern of specialization, whereby loans in affected areas are increasingly originated by banks with special abilities or incentives to seize opportunities in a distressed market, but increasingly transferred to agents which can better support the associated risk.

Suggested Citation

  • Chavaz, Matthieu, 2016. "Dis-integrating credit markets: diversification, securitization, and lending in a recovery," Bank of England working papers 617, Bank of England.
    • Handle: RePEc:boe:boeewp:0617
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    More about this item

    Keywords

    Bank lending; recovery; diversification; securitization; mortgage lending; Home Mortgage Disclosure Act (HMDA).;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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