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Do European Banks with a Covered Bond Program still issue Asset-Backed Securities for funding?

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  • Nils Boesel
  • C.J.M. Kool
  • S. Lugo

Abstract

The decline in the issuance of Asset-Backed Securities (ABS) since the financial crisis and the comparative advantage of Covered Bonds (CBs) as a funding alternative to ABS raise the question whether banks still issue ABS as a mean to receive funding. Employing double-hurdle regression models on a dataset of 134 European banks observed during the period from 2007 to 2013, this study reveals that banks with a Covered Bond Program (CBP) securitize ceteris paribus less of their assets. The estimated difference in ABS issuance is mainly driven by banks more likely to issue ABS as a funding tool, rather than trying to manage their credit risk exposure or to meet regulatory capital requirements. Consistently, a worse liquidity/funding position results in higher levels of securitization only for banks without a CBP.

Suggested Citation

  • Nils Boesel & C.J.M. Kool & S. Lugo, 2016. "Do European Banks with a Covered Bond Program still issue Asset-Backed Securities for funding?," Working Papers 16-03, Utrecht School of Economics.
    • Handle: RePEc:use:tkiwps:1603
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    Keywords

    Securitization; asset-backed securities; covered bonds; bank funding; capital relief;
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