Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266554 
Year of Publication: 
2022
Series/Report no.: 
IWH Discussion Papers No. 6/2021
Version Description: 
This version: 08.12.2022
Publisher: 
Halle Institute for Economic Research (IWH), Halle (Saale)
Abstract: 
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.
Subjects: 
competition
deposits
originate-to-distribute (OTD)
securitization
JEL: 
G21
G28
K11
Document Type: 
Working Paper

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