Asymmetric information and the securitization of SME loans

47 Pages Posted: 12 Feb 2021

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 of Banking and Finance; NTNU Business School; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 11, 2021

Abstract

Using all loans granted to firms recorded in the Italian credit register, we estimate correlations between risk-transfer and default probabilities to gauge the severity of informational asymmetries in the loan securitization market. First, the analysis confirms the presence of information frictions in the SME loan securitisation market. Second, the unconditional quality of securitized loans remains significantly better than that of non-securitized ones, in line with the notion that markets anticipate the presence of information frictions and lead to a selection of loans which offsets the detrimental effects of asymmetric information. Third, using data for firms that maintain multiple bank relationships, we obtain indications of the relative importance played by two forms of information friction, adverse selection and moral hazard. While the former is widespread, the latter is present in weak relationships only, in line with the notion that such loans are characterised by a limited commitment to exert costly monitoring by the bank.

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. 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)

NTNU Business School ( email )

Norway

University of Zurich - Department of Banking and 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

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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