Securitized banking and the Euro financial crisis: Evidence from the Italian banks risk-taking

• This research focuses on the effects of securitization on the bank's risk exposure over the financial crisis period both in terms of systematic, idiosyncratic and systemic risk.
• We find evidence of increasing systematic and idiosyncratic risk with securitization and that after the 2007 these increases are even higher.
• Finally we find that the originator banks experienced higher systemic risk (MES) both in pre and after 2007-crisis.

This research explores the effects of securitization on banks equity risk exposure. A widespread opinion before the crisis of 2007–2008 was that securitization enhances financial stability. We provide empirical evidence of the impact of securitization on the market's perception of the originating banks’ risk exposure before and after the crisis, in terms of systematic and idiosyncratic risk. Using a sample of Italian listed banks over the period 2000–2009, we find evidence of increasing systematic and idiosyncratic risk for originating banks, in particular in the post-crisis period. We also find that securitization increases the probability of the originator banks to contribute to a market crisis.