Securitisation

1. Assets - tradable securities.

The process of converting non-tradable assets into tradable securities.

For example turning non-tradable assets, like residential mortgage loans, into tradable assets (such as mortgage-backed securities).

This is often undertaken through a securitisation special purpose vehicle.

The credit risk of the assets is divided into tranches, and payments to the investors are dependent on the performance of the assets.

When a special purpose vehicle is used, the assets are transferred to the special purpose vehicle, which then issues securities.

Non-performance of underlying assets is a key risk for investors, and was one of the triggers for the Global Financial Crisis (GFC).

2.

The tradable securities created by the securitisation process.

3. Securities - issuance.

The trend for larger non-financial companies to use less bank lending facilities and instead to issue their own securities direct to the markets.

See also

• CDO
• CMBS
• Collateral
• Collateralise
• Covered bond
• Factoring
• Global Financial Crisis (GFC)
• Loan
• Mortgage
• Mortgage-backed securities (MBS)
• Prospectus Regulation
• Receivables securitisation
• Securitisation Regulation
• Securitisation special purpose vehicle
• Securitisation swap
• Securitise
• Security
• Significant Risk Transfer
• Sponsor
• SSPE
• Sukuk
• Whole business securitisation

Other resource

The return of securitisation, The Treasurer, July 2013