Zusammenfassung:
We develop a general equilibrium framework in which a commercial banker, constrained by capital adequacy requirements, creates a special purpose vehicle (SPV) to hold securitized assets off its balance sheet. By operating the bank and SPV as separate entities, the banker circumvents regulation, creating a gap between de jure and de facto statutory capital ratios. We quantify this gap. Our model integrates loan-to-value ratio and collateral constraints, together with credit default risk, to examine the dynamic interactions between the real and financial sectors, both with and without securitization, over business cycle. We find that securitization is expansionary, promotes regulatory arbitrage, increases off-balance-sheet lending under tighter regimes, amplifies credit risk, and enhances welfare in the steady state. Securitization becomes a prominent tool in bypassing stricter regulations, such as high capital requirements or tight loan-to-value caps. Our results call for robust oversight of securitization to preserve the integrity of capital regulation.