Do reputable issuers provide better-quality securitizations

Deku, S.Y. ORCID: 0000-0003-1579-8708, Kara, A. and Marqués-Ibáñez, D., 2019. Do reputable issuers provide better-quality securitizations. Frankfurt am Main, Germany: European Central Bank.

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Abstract

We examine the link between issuer reputation and mortgage-backed security (MBS) performance using a sample of 4,247 European MBS issued between 1999 and 2007. We measure performance with credit rating downgrades and delinquencies and track their changes over the long term. We find that, overall, MBS sold by reputable issuers are collateralised by higher quality asset pools which have lower delinquency rates and are less likely to be downgraded. However, as credit standards declined during the boom period of 2005-2007, asset pools securitized by reputable issuers were of worse quality compared to those securitized by less reputable issuers. Therefore, reputation as a self-disciplining mechanism failed to incentivise the production of high quality securities during the credit boom.

Item Type: Working paper
Description: European Central Bank working paper series no. 2236
Creators: Deku, S.Y., Kara, A. and Marqués-Ibáñez, D.
Publisher: European Central Bank
Place of Publication: Frankfurt am Main, Germany
Date: February 2019
Number: 2236
ISSN: 1725-2806
Identifiers:
NumberType
10.2866/05138DOI
Rights: © European Central Bank, 2019
Divisions: Schools > Nottingham Business School
Depositing User: Jonathan Gallacher
Date Added: 20 Mar 2019 07:56
Last Modified: 20 Mar 2019 08:01
URI: http://irep.ntu.ac.uk/id/eprint/36086

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