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| Author: | Loutskina, E. |
| Title: | The role of securitization in bank liquidity and funding management |
| Journal: | Journal of Financial Economics
2011 : JUN, VOL. 100:3 p. 663-684 |
| Index terms: | monetary policy portfolio management securities finance economics |
| Language: | eng |
| Abstract: | This research paper examines the role of securitization in bank management. It proposes a new index of "bank loan portfolio liquidity", which can be thought of as a weighted average of the potential to securitize loans of a given type, where the weights reflect the composition of a bank loan portfolio. This new index is used to show that by allowing banks to convert illiquid loans into liquid funds, securitization reduces banks' holdings of liquid securities and increases their lending ability. Furthermore, securitization provides banks with an additional source of funding and makes bank lending less sensitive to cost of funds shocks. |
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