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Deposit Competition and Mortgage Securitization

Mcgowan, Danny; Nguyen, Huyen; Schaeck, Klaus


Huyen Nguyen

Klaus Schaeck


We study how deposit competition affects a bank's decision to securitize mortgages. Exploiting the state-specific removal of deposit market caps across the US as a source of competition, we find a 7.1 percentage point increase in the probability that banks securitize mortgage loans. This result is driven by an 11 basis point increase in deposit costs and corresponding reductions in banks' deposit holdings. Our results are strongest among banks that rely more on deposit funding. These findings highlight a hitherto undocumented and unintended regulatory cause that motivates banks to adopt the originate-to-distribute model.


Mcgowan, D., Nguyen, H., & Schaeck, K. (in press). Deposit Competition and Mortgage Securitization. Journal of Money, Credit and Banking,

Journal Article Type Article
Acceptance Date Apr 23, 2024
Deposit Date May 3, 2024
Journal Journal of Money, Credit and Banking
Print ISSN 0022-2879
Publisher Wiley
Peer Reviewed Peer Reviewed
Keywords originate-to-distribute; securitization; deposits; competition * We are grateful for helpful comments and suggestions from the editor; Luc Laeven; two anonymous referees
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This file is under embargo due to copyright reasons.

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