What is it about?

This paper empirically investigates the relationship of securitization and covered bonds with bank stability and highlights that this relationship varies with the level of a bank's involvement in a specific instrument. We have used the data of 46 banks in Europe that are issuing both asset-backed securities and covered bonds.

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Why is it important?

This study makes a two-fold contribution to the literature. First, the study includes CB in the analysis along with asset-backed securities (ABS). Both instruments share many similarities, making them a good candidate for comparison. Second, the study provides an alternative perspective that I call "securitization-scalability". I argue that instead of ABS or CB issuance per se, their respective volumes determine their implications on bank stability. The intended benefits of these funding sources might not be accessible either beyond or below a certain level. For these reasons, it is often argued that limits should be imposed on the issuance of these instruments.


This article provides a different perspective on securitization as compared to different studies. I argued in this study that it is not the securitization itself rather its volume that determines bank stability.

Ahmed Arif
National University of Computer and Emerging Sciences

Read the Original

This page is a summary of: Effects of securitization and covered bonds on bank stability, Research in International Business and Finance, October 2020, Elsevier, DOI: 10.1016/j.ribaf.2020.101196.
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