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).
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.
- Covered bond
- Prospectus Regulation
- Securitisation Regulation
- Securitisation special purpose vehicle
- Securitisation swap
- Significant Risk Transfer
- Whole business securitisation