WHY DO BANKS SECURITIZE? THE CASE OF ITALY MARIAROSARIA AGOSTINO Research Fellow, Dipartimento di Economia e Statistica, Università della Calabria
[email protected], +39 0984 492469 MARIA MAZZUCA Assistant Professor, Dipartimento di Scienze Aziendali, Università della Calabria
[email protected], +39 0984492276, fax +39 0984 492277 Abstract This paper explores the motivations underlying the securitization activities of Italian banks from 1999 to 2006. The hypotheses under investigation are those of funding, specialization and regulatory capital arbitrage. To test which of the incentives suggested by these hypotheses are statistically significant securitization’s determinants, we estimate a probit model, in which the probability of carrying out securitizations is linked to a set of balance sheet indicators and a vector of further control variables. Consistently with the funding hypothesis, the main conclusion of the research is that Italian banks seem to securitize in order to diversify/optimize the available funding channels. Besides, the status of the bank on the stock exchange positively affects the decision of securitizing, presumably because of the “market knowledge effect”. By contrast, the motivations related to the other two hypotheses do not appear to be relevant. Finally, also bank’s size tends to increase the propensity to securitize, supporting the argument that bigger banks are better able to bear the high structuring costs associated to securitization. 1. Introduction Securitization involves the legal or economic transfer of assets or obligations by an originating institution to a third party, typically referred to as a “special purpose vehicle” (SPV); the SPV then issues asset-backed securities (ABS), or other structured finance securities (MBS, CMBS, RMBS, CDO, WBS and so on), representing claims against specific pools of assets (Basel Committee on Banking Supervision, 2001).