Why securitise?
What is securitisation?
In securitisation, a company (known as the “originator”) sells a portfolio of assets to investors by structuring them into tradable securities. These securities represent a stake in the portfolio. Financial techniques are used to tranche the portfolio of assets, so that the securities issued carry a given degree of risk (e.g. senior, mezzanine, junior). Investors are remunerated consistently with tranche risk.
Banks can invest either directly on balance sheet or through CP conduits (banks provide a liquidity line)
Roles & Responsibilities
| Roles | Responsibilities |
|---|---|
| Originator | A corporation owning the assets being securitised. Financial institutions securitise mortgages, consumer loans, insurance contracts etc. Non bank originators securitise trade receivables, inventories, operational leasing future flows etc. Originators generally service the assets securitised. |
| SSPE | A corporation, trust or other entity established for the purpose of carrying out one or more securitisations, the structure of which is intended to isolate the obligations of the SSPE from those of the originator. |
| Investor | A natural or legal person holding a securitisation position |
| Arranger | In general, a credit institution or an investment firm which assists the originator in the structuration of a securitisation transaction (portfolio selection, tranching, definition of concentration limits and portfolio triggers), and its marketing to investors. |
| External Legal Counsel | A law firm responsible for documenting the transaction and confirming the true sale of assets. |
| Management Company | A company responsible for SSPE management (cash flows and reporting) |
| Back Up Servicer (if applicable) | A service provider who agrees to take over the servicing of a portfolio of assets on the occurrence of certain trigger events, most commonly the failure of the servicer to perform. |