TY - JOUR

T1 - Are Covered Bonds a Substitute for Mortgage-Backed Securities?

AU - Carbo-Valverde, Santiago

AU - Rodriguez Fernandez, Francisco

AU - Rosen, Richard

PY - 2017/7

Y1 - 2017/7

N2 - Given the problems in the mortgage-backed securities (MBS) market during the financial crisis, some suggest that covered bonds (CB) might be a substitute for MBS. This could lead to a number of policy alternatives in countries where regulation and business have been mainly leaning to one of these types of securities. Examining the use of CB and MBS in the U.S. and Europe, we find that the two often seem to be used for different purposes. Banks are more likely to use CB when they have liquidity needs while MBS are associated with risk management and agency problems. Introducing MBS to markets where only CB are common or CB to markets where only MBS are common could have large effects.

AB - Given the problems in the mortgage-backed securities (MBS) market during the financial crisis, some suggest that covered bonds (CB) might be a substitute for MBS. This could lead to a number of policy alternatives in countries where regulation and business have been mainly leaning to one of these types of securities. Examining the use of CB and MBS in the U.S. and Europe, we find that the two often seem to be used for different purposes. Banks are more likely to use CB when they have liquidity needs while MBS are associated with risk management and agency problems. Introducing MBS to markets where only CB are common or CB to markets where only MBS are common could have large effects.

U2 - 10.1080/17487870.2017.1293537

DO - 10.1080/17487870.2017.1293537

M3 - Article

VL - 20

SP - 238

EP - 253

JO - Journal of Economic Policy Reform

JF - Journal of Economic Policy Reform

SN - 1748-7870

IS - 3

ER -