Abstract
This study investigates the main factors driving the evolution of the securitization of loans to Italian small and medium-sized enterprises (SMEs). The value of securitization increased in last two years, even though it has not been used as collateral for central banks. The disposal of non-performing loans (NPLs) may have been rather triggered by increasing attention of the international institutions to such an issue, within the general purpose of financial stability. The purpose of this paper is to interpret such a phenomenon focusing on Italian banks and restricting the analysis to the case of securitizations backed with loans to small and medium-sized enterprises (SMEs). The interesting result that emerges, supported by econometrically tested empirical evidence, is that given the orientation of international financial institutions, such as the ECB and the EBA, and reacting to incentives coming from the fiscal policy authorities for the public guarantee of loans, banks have been using securitization to reduce the burden on their bad balance sheets due to (NPLs). It was found that the public guarantee had a positive impact on SME securitization, whereas securitization in other sectors has not been affected significantly. Such evidence suggests that, in the absence of a public guarantee, the financial stability target would have been at risk, and the effectiveness of collateral-based policies in the recent past must be improved to enhance access to credit for SMEs.
Highlights
The structural changes to the monetary policy regime of the last decade, aimed at facilitating access to liquidity during the economic crisis, have significantly affected the behavior of financial intermediaries
The interesting result that emerges, supported by econometrically tested empirical evidence, is that given the orientation of international financial institutions, such as the ECB and the EBA, and reacting to incentives coming from the fiscal policy authorities for the public guarantee of loans, banks have been using securitization to reduce the burden on their bad balance sheets due to (NPLs)
The trend of issues in 2018 and 2019 is abnormal if compared to all previous years, and the trend of securitization of loans to SMEs does not seem to have stimulated a larger supply of credit to small and medium-sized enterprises as supposed by policy adopted by the European Central Bank
Summary
The structural changes to the monetary policy regime of the last decade, aimed at facilitating access to liquidity during the economic crisis, have significantly affected the behavior of financial intermediaries. The incentives provided by the monetary policy authorities do not explain the substantial increase in the issuance of securitized assets in 2018 and 2019, since in the same period the nature and extent of these incentives did not change significantly. In 2018 and 2019, ABS issues increased abnormally despite no structural change occurred at an ECB-policy level. The trend of issues in 2018 and 2019 is abnormal if compared to all previous years, and the trend of securitization of loans to SMEs does not seem to have stimulated a larger supply of credit to small and medium-sized enterprises as supposed by policy adopted by the European Central Bank. The 2018–2019 increase is not justified on the ground of collateral-pledgeability to ECB
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