Asymmetric information and the securitization of SME loans

53 Pages Posted: 12 Feb 2021 Last revised: 27 Jul 2023

See all articles by Ugo Albertazzi

Ugo Albertazzi

ECB -DG Monetary Policy

Margherita Bottero

Bank of Italy

Leonardo Gambacorta

Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)

Steven Ongena

University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 11, 2021

Abstract

Using data from the Italian credit register encompassing all loans granted to firms, we examine the correlations between risk-transfer and default probabilities to gauge the severity of informational asymmetries in the securitization market for loans to SMEs. First, the analysis confirms the presence of information frictions. Second, the unconditional quality of securitized loans remains significantly higher than that of non-securitized ones, consistent with the view that market participants anticipate the presence of information frictions and carefully select which loans to securitize to offset the detrimental effects of asymmetric information. Third, by analysing firms with multiple bank relationships, we provide insights into the relative importance of adverse selection and moral hazard as forms of informational friction. While adverse selection is widespread, moral hazard is primarily observed in weaker relationships, implying that loans in these cases exhibit limited commitment from banks to engage in costly monitoring.

Keywords: securitization, SME loans, moral hazard, adverse selection

JEL Classification: D82, G21

Suggested Citation

Albertazzi, Ugo and Bottero, Margherita and Gambacorta, Leonardo and Ongena, Steven R. G., Asymmetric information and the securitization of SME loans (February 11, 2021). Swiss Finance Institute Research Paper No. 21-13, Available at SSRN: https://ssrn.com/abstract=3784509 or http://dx.doi.org/10.2139/ssrn.3784509

Ugo Albertazzi

ECB -DG Monetary Policy ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Margherita Bottero

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Leonardo Gambacorta

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Steven R. G. Ongena (Contact Author)

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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