Mortgage-backed Securitization and SME Lending

What is it about?

Securitization can have an impact on bank lending. There is no conclusive evidence, especially for the European context, that that impact of securitization on business loans is limited in the case of small banks as compared to large banks. Since small banks play an important role in SME lending in Europe, investigating how securitization has affected their lending activity in the crisis period can contribute to the design of policy initiatives that support the recovery of the SME sector when future financial and economic crises occur. The results suggest that less deposit-funded, less liquid, less profitable and less capitalized CBs have been more likely to securitize (mortgage) loans during the crisis, and to a larger extent. As far as the impact is concerned, securitization activities have not affected the supply of new loans to SMEs, but CBs have invested the proceedings of securitization in non-SME assets to rebalance the risk of the SME loan portfolio on the balance sheet.

Featured Image

Why is it important?

This paper hopes to contribute to filling the gaps in the literature by, first, investigating the drivers of securitization activity of small Italian banks, i.e. cooperative banks (CBs), during the financial and economic crisis (2007–2014) and, second, analysing the impact of securitization on the CBs’ supply of loans to SMEs.