Deposit Competition and Securitization

50 Pages Posted: 12 Dec 2022

See all articles by Danny McGowan

Danny McGowan

University of Birmingham

Huyen Nguyen

Halle Institute for Economic Research

Klaus Schaeck

University of Bristol

Date Written: November 29, 2022


We provide novel evidence that deposit competition incentivizes banks to securitize loans. Exploiting the state-specific removal of deposit market caps across the U.S. as an exogenous source of competition, we document a 7.1 percentage point increase in the probability that banks securitize their assets. This result is driven by an 11 basis point increase in costs of deposits and a corresponding decrease in banks’ deposit growth. Our results are strongest among small and single state incumbent banks that rely more on deposit funding. These findings highlight an unintended regulatory cause that motivates banks to adopt the originate-to-distribute model.

Keywords: originate-to-distribute(OTD), securitization, deposits, competition

JEL Classification: G21, G28, K11

Suggested Citation

McGowan, Danny and Nguyen, Huyen and Schaeck, Klaus, Deposit Competition and Securitization (November 29, 2022). Available at SSRN: or

Danny McGowan

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom

Huyen Nguyen (Contact Author)

Halle Institute for Economic Research ( email )

Klaus Schaeck

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

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