Securitization and monetary policy relationship

Securitization is seen as a very important external financing method in meeting the liquidity needs of banks and commercial companies. Recently, some researchers are expressed that the interaction of securitization with monetary policy has an effect on some channels of the monetary transmission mechanism. Monetary transmission channels affected by securitization: liquidity channel and in the sub-category of credit channel, it consists of bank lending channel and risk taking channel. The liquidity channel shows that as a result of increasing the liquidity conditions of securitization, it affects the mortgage market returns, tends to decrease the interest rate on housing loans and causes a lower loan cost in housing loans. In the credit channel of monetary policy, it is revealed that securitization provides banks with a source of funds that can reduce the impact of increasing funding costs with the implementation of monetary policy, and that the bank lending channel can potentially compensate the policy effect of the monetary authority on the loan supply. However, loan securitization also changes banks' incentives to take risks. In this study, it is evaluated that the effect of securitization on the transmission mechanism of monetary policy and may weaken or strengthen the effect of policy instruments in some transmission channels.