Authors: Amit Ghosh
Addresses: Department of Economics, Illinois Wesleyan University, 1312 Park Street, P.O. Box 2900, Bloomington, IL 61702-2900, USA
Abstract: A key financial innovation used widely in banking is the process of securitisation. Using data on all 5491 commercial banks in the USA that were operational between 2001 2nd quarter to 2016 1st quarter, the present study examines the impact of both aggregate securitisation activity and its underlying asset categories on bank profitability, leverage capital, diversification and risks. Aggregate securitisation and that of asset-backed securities as well as its constituent categories of commercial & industrial (C&I) loans and other loans significantly increase banks' profits. Securitisation significantly increase banks leverage capital and diversification activities, including net securitisation income. Finally, we find securitisation activities to reduce banks credit risks but increase default risk in the post-crisis period.
Keywords: securitisation; US commercial banking; profitability; leverage capital; diversification; bank risks.
International Journal of Financial Innovation in Banking, 2018 Vol.2 No.1, pp.1 - 28
Received: 15 Dec 2016
Accepted: 26 Jul 2017
Published online: 04 Jun 2018 *