This study investigates the impact of securitization on the credit-risk taking behavior of banks. Using US bank holding company data from 2001 to 2007 we find that banks with a greater balance of outstanding securitized assets choose asset portfolios of lower credit risk. Examining...

By using securitization, a bank is able to lower its cost of funding, improve risk management and increase profitability.The key to the realization of the potential benefits of securitization lies in the quality of the underlying receivables, which, in turn, is directly related to the...