Securitized banking and the Euro financial crisis: Evidence from the Italian banks risk-taking

This research explores the effects of securitization on banks equity risk exposure. A widespread opinion before the crisis of 2007-2008 was that securitization enhances financial stability. We provide empirical evidence of the impact of securitization on the market's perception of the originating banks’ risk exposure before and after the crisis, in terms of systematic and idiosyncratic risk. Using a sample of Italian listed banks over the period 2000-2009, we find evidence of increasing systematic and idiosyncratic risk for originating banks, in particular in the post-crisis period. We also find that securitization increases the probability of the originator banks to contribute to a market crisis.