Securitising banks cut lending 10 percent more after rate increases
A European Central Bank (ECB) working paper finds that banks active in securitisation reduce credit supply by 6 to 10 percent more over one year following a one percentage point policy rate increase compared to matched peers, driven by shifts in synthetic risk transfers.
Synthetic risk transfers amplify lending drops
Using AnaCredit loan-level data covering 2021 to 2025 across more than 230 euro area institutions, authors Dorian Henricot and Enrico Sette analyze the transmission of policy rate changes.
A one standard deviation increase in policy rates reduces new loan flows from securitising banks by about 5 percentage points more than control banks after two quarters.
The effect is concentrated in synthetic securitisations and Significant Risk Transfers (SRTs), which represent the bulk of recent market growth to €1.5 trillion in 2025.
A 100bp rate hike leads non-bank financial institutions to reduce their securitisation holdings by 10 percent and by 4.5 percentage points relative to covered bonds.
Non-bank pullback spills into corporate credit
The lending contraction hits loans with maturities above one year and safer borrowers hardest, as these assets are most frequently securitised.
When policy tightens, non-bank investors demand higher yields, causing the spread between corporate bond yields and lending rates to widen above 100 basis points.
Consequently, banks cannot maintain origination volumes.
Analysis of borrower portfolios shows that corporate clients cannot offset this reduction through other banking relationships, resulting in a net decline in total corporate borrowing during tightening cycles.
A double-edged capital relief tool
The paper convincingly dismantles the dogma that securitisation insulates lenders from rate hikes.
Exposing non-bank demand as the volatile link reveals synthetic transfers as a hidden amplifier of policy tightening.
Regulators promoting securitisation must now address this procyclical vulnerability.