The literature has typically focused on the impact of securitisation on banks themselves (such as their lending behaviour or their risk-taking), the impact on loan conditions (e.g., the pricing of loans) and the impact on borrowers (such as their likelihood of default). This focus on the micro-level has clear advantages in providing good settings for identification.
In a recent study (Bertay et al. 2015) we consider the relationship between securitisation and aggregate outcomes, in particular economic activity. While identification is more challenging at the aggregate level, this focus offers distinct advantages. Securitisation is likely to be associated with important externalities that cannot be captured by micro-studies. For example, while securitisation may very well increase profits and lower risk for the bank that is shedding the risk, it may be detrimental to the buyers of securitisation products. In addition, securitisation may also affect the efficiency of capital allocation in the economy (it can either increase or decrease it), which has implications that will not be visible at the immediate bank-firm nexus.
Our empirical analysis shows that securitisation of loans to households is negatively related to economic activity. Securitisation of business loans, on the other hand, displays a positive association with economic activity, albeit a weak one.
In addition, we find that:
- Securitisation increases an economy’s consumption-investment ratio.
- Securitisation has a more pronounced (negative) impact on proxies of the supply side of the economy than on economic growth. This is consistent with a shift from investment to consumption constraining the supply side of the economy, while potentially boosting demand (and hence leading to a more muted impact on GDP).
Policymakers clearly recognise the importance of fostering ‘high quality’ securitisation, that is, securitisations that are transparent and include collateral of low risk borrowers. Our analysis suggests that the authorities should not only care about the securitisation quality, but also whether the collateral is in the form of household or business loans. If the objective is to stimulate growth and investment, the focus should be on the latter.