Keeping funding costs under control: evidence from bank bond issues

This paper analyses the development of bank long-term funding at an international level. We consider about 16,000 debt issuances in the period 2006-2012 in Europe and US. We investigate the driving forces that helped banks to weather the storm during the financial crisis with a relatively stable cost of long term funding. Through the use of a Principal Component Analysis we represent bank business model and we show that different orientation towards the Originate-To-Hold (OTH) or the Originate-To-Distribute (OTD) business models had subsequently, during crisis times, diverse impact on the variability or stability of the cost of long-term funds. We document the relevance of the OTH bank business model in keeping these costs under control and to be a sustainable business model in crisis times