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Banks are usually better informed on the loans they originate than other financial intermediaries. As a result, securitized loans might be of lower credit quality than otherwise similar nonsecuritized loans. We assess the effect of securitization activity on loans’ relative credit quality employing a uniquely detailed dataset from the euro-denominated syndicated loan market. We find that, at issuance, banks do not seem to select and securitize loans of lower credit quality. Following securitization, however, the credit quality of borrowers whose loans are securitized deteriorates by more than those in the control group. We find tentative evidence suggesting that poorer performance by securitized loans might be linked to banks’ reduced monitoring incentives.

Asset-backed financing. --- Syndicated loans. --- Credit ratings. --- Commercial ratings --- Credit checks --- Credit guides --- Credit investigations --- Credit reports --- Ratings, Credit --- Participating loans --- Loans --- Asset-backed securities --- Asset-based financing --- Asset securitization --- Securitization, Asset --- Corporations --- Covered bonds --- Finance --- Banks and Banking --- Financial Risk Management --- Investments: General --- Money and Monetary Policy --- Industries: Financial Services --- Exports and Imports --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financial Crises --- International Lending and Debt Problems --- Investment & securities --- Monetary economics --- Banking --- Economic & financial crises & disasters --- International economics --- Securitization --- Credit --- Financial crises --- Financial institutions --- Financial services --- Money --- Debt default --- External debt --- Asset-backed financing --- Banks and banking --- Debts, External --- United States