{
  "title": "Credit, Securitization and Monetary Policy: Watch Out for Unintended Consequences",
  "publication": "IMF Working Papers, March 23, 2016",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/credit-securitization-and-monetary-policy-watch-out-for-unintended-consequences-43827",
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  "summary": "We show evidence that interest rate hikes slowdown loan growth but lead intermediation to migrate from banks’ balance sheets to non-banks via increased securitization activity.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Paper authors: Andrea Pescatori, Juan Sole.\n- Publication date: March 23, 2016.\n- Core finding: Interest rate hikes slow loan growth but induce migration of financial intermediation from banks’ balance sheets to non-banks via increased securitization activity.\n- Contrasting behavior: Private-label securitization drove past increases in securitization activity; government sponsored entities (GSEs) such as Freddie Mac and Fannie Mae react to higher policy rates by cutting back on securitization activity but expanding loans to the Federal Home Loan Bank system.\n- Publication type: IMF Working Paper No. 2016/076.\n- Pages: 21."
    },
    {
      "heading": "Key findings and evidence",
      "content": "- Interest rate hikes:\n  - Slow loan growth.\n  - Increase securitization activity, shifting intermediation toward non-banks.\n  - Can have unintended consequences by potentially raising systemic risk through migration of activity to more weakly regulated sectors.\n- Drivers of securitization activity:\n  - Historically driven primarily by private-label securitization.\n  - GSEs (Freddie Mac, Fannie Mae) respond differently: reduce securitization but expand lending to the Federal Home Loan Bank system."
    },
    {
      "heading": "Policy implications and risks",
      "content": "- Monetary tightening can produce unintended sectoral shifts in financial intermediation:\n  - Raising policy rates may not uniformly reduce systemic risk; instead, it can reallocate risk to shadow banking and less regulated entities via securitization.\n- Regulatory and supervisory considerations:\n  - Monitor shifts in securitization activity and non-bank intermediation following monetary policy tightening.\n  - Consider policy responses that account for migration of credit intermediation to non-bank sectors to avoid increasing systemic risk."
    },
    {
      "heading": "Subjects and keywords (as provided)",
      "content": "- Subjects: Banking, Central bank policy rate, Financial institutions, Financial services, Loans, Monetary policy, Monetary tightening, Mortgages, Securitization.\n- Keywords: asset, bank, Central bank policy rate, federal funds rate, financial intermediation, financing FHLB bank, Global, government sponsored enterprise, GSE, GSE assets, GSE securitization, Loans, Monetary policy, monetary policy shock, monetary policy shocks, Monetary tightening, mortgage, Mortgages, private-label ABS issuers, proxy VAR, securitization, securitization activity, securitization market, shadow banking, VAR, WP.\n\n---\n\n Content in this bundle\n\n- wp1676\n  - wp1676 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1676 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/credit-securitization-and-monetary-policy-watch-out-for-unintended-consequences-43827"
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    "Authors: Andrea Pescatori, Juan Sole",
    "Published: March 23, 2016",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475522723.001",
    "Paper authors: Andrea Pescatori, Juan Sole.",
    "Publication date: March 23, 2016.",
    "Core finding: Interest rate hikes slow loan growth but induce migration of financial intermediation from banks’ balance sheets to non-banks via increased securitization activity.",
    "Contrasting behavior: Private-label securitization drove past increases in securitization activity; government sponsored entities (GSEs) such as Freddie Mac and Fannie Mae react to higher policy rates by cutting back on securitization activity but expanding loans to the Federal Home Loan Bank system.",
    "Publication type: IMF Working Paper No. 2016/076.",
    "Pages: 21.",
    "Interest rate hikes:",
    "Drivers of securitization activity:",
    "Monetary tightening can produce unintended sectoral shifts in financial intermediation:",
    "Regulatory and supervisory considerations:",
    "Subjects: Banking, Central bank policy rate, Financial institutions, Financial services, Loans, Monetary policy, Monetary tightening, Mortgages, Securitization.",
    "Keywords: asset, bank, Central bank policy rate, federal funds rate, financial intermediation, financing FHLB bank, Global, government sponsored enterprise, GSE, GSE assets, GSE securitization, Loans, Monetary policy, monetary policy shock, monetary policy shocks, Monetary tightening, mortgage, Mortgages, private-label ABS issuers, proxy VAR, securitization, securitization activity, securitization market, shadow banking, VAR, WP.",
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