Did the securitization market freeze affect bank lending during the financial crisis? Evidence from a credit register

Using data from the Italian Credit Register we identify the adverse effect of the freeze of the securitization market on bank lending during the crisis of 2007–2008. Applying a differences-in-differences estimation to data on firms that borrow from multiple banks, we single out credit supply by including firm fixed effects. Our results show that the degree to which banks tightened credit supply to nonfinancial firms is positively related to the share of loans they securitized before the crisis. The tightening translated into lower credit growth, higher interest rates, lower probability of accepting loan applications and higher probability of relationship termination. Firms were unable to fully compensate the negative credit supply shock, which suggests that the securitization freeze played a role in reducing aggregate credit availability.