Competition and Bank Risk the Role of Securitization and Bank Capital

40 Pages Posted: 7 Aug 2019

See all articles by Yener Altunbas

Yener Altunbas

University of Wales, Bangor

David Marques-Ibanez

European Central Bank (ECB)

Michiel Leuvensteijn

Authority for Consumers & Markets (ACM)

Tianshu Zhao

University of Birmingham

Date Written: July 2019

Abstract

We examine how bank competition in the run-up to the 2007-2009 crisis affects banks' systemic risk during the crisis. We then investigate whether this effect is influenced by two key bank characteristics: securitization and bank capital. Using a sample of the largest listed banks from 15 countries, we find that greater market power at the bank level and higher competition at the industry level lead to higher realized systemic risk. The results suggest that the use of securitization exacerbates the effects of market power on the systemic dimension of bank risk, while capitalization partially mitigates its impact.

Keywords: Bank credit, Interest rates on loans, Bank liquidity, Central banks, Bank accounting, Financial crises, securitization, pre-crisis, industry level, individual bank, market power

JEL Classification: G21, D22, E01, K2, E52, M41

Suggested Citation

Altunbas, Yener and Marques-Ibanez, David and Leuvensteijn, Michiel and Zhao, Tianshu, Competition and Bank Risk the Role of Securitization and Bank Capital (July 2019). IMF Working Paper No. 19/140, Available at SSRN: https://ssrn.com/abstract=3433132

Yener Altunbas (Contact Author)

University of Wales, Bangor ( email )

Bangor, Wales LL57 2DG
United Kingdom

David Marques-Ibanez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
49 6913 44 6460 (Phone)
49 6913 44 6460 (Fax)

Michiel Leuvensteijn

Authority for Consumers & Markets (ACM) ( email )

Muzenstraat 41
Den Haag, 2511 WB
Netherlands

Tianshu Zhao

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom

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