Upload
harleen-kaur
View
218
Download
0
Embed Size (px)
Citation preview
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 1/43
Securitization ;
Securitisation, in its most basic form, is a method of financing assets. Rather than
selling those assets “whole,” the assets are combined into a pool, and then that pool
is split into shares. Those shares are sold to investors who share the risk and reward
of the performance of those assets. It can be viewed as being similar to a corporation
selling, or “spinning off,” a profitable business unit into a separate entity. They
trade their ownership of that unit, and all the profit and loss that might come in the
future, for cash right now. A very basic example would be as follows. XYZ Bank
loans 10 people $100,000 a piece, which they will use to buy homes. XYZ has
invested in the success and/or failure of those 10 home buyers- if the buyers make
their payments and pay off the loans, XYZ makes a profit. Looking at it another
way, XYZ has taken the risk that some borrowers won’t repay the loan. In exchange
for taking that risk, the borrowers pay XYZ a premium in addition to the interest
on the money they borrow. XYZ will then take these ten loans, and put them in apool. They will sell this pool to a larger investor, ABC. ABC will then split this pool
(which consists of high risk loans and low risk loans) into equal pieces. The pieces
will then be sold to other smaller investors, (as bonds).
Features of securitisation:
A securitised instrument, as compared to a direct claim on the issuer,
generally have the following features.
Marketability:
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 2/43
The very purpose of securitisation is to ensure marketability to financial
claims.
Hence, the instrument is structured to be marketable. This is one of the most
important
features of a securitised instrument, and the others that follow are mostly
imported only
to ensure this one. The concept of marketability involves two postulates:
(a) The legal and systemic possibility of marketing the instrument
(b) The existence of a market for the instrument.
Legal aspect with respect to marketing instrument is concerned; traditional
law
relating to business practices has not evolved much. Negotiable instruments
were mostly limited in application to what were then in circulation as such.
Besides, the corporate laws mostly defined and sought to regulate issuance
of usual corporate financial claims, such as shares, bonds and debentures.
This gives raise to the need for a codified system of law for security andcredibility of operations.
The second issue is marketability of the instrument. . The purpose of
securitisation is to broaden the investor base and bring the average investor
into the
capital markets. Either liquidity to a securitised instrument is obtained by
introducing it
into an organized market (such as securities exchanges) or by one or more
agencies
acting as market makers. That is, agreeing to buy and sell the instrument at
either predetermined or market-determined prices.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 3/43
Quality of security:
To be accepted in the market, a securitised product has to have a
merchantable
quality. The concept of quality in case of physical goods is something, which
is
acceptable in normal trade. When applied to financial products, it would
mean the
financial commitments embodied in the instruments are secured to theinvestors'
satisfaction. "To the investors' satisfaction" is a relative term, and
therefore, the
originator of the securitised instrument secures the instrument based on the
needs of the investors. The rule of thumb is the more broad the base of the
investors, the less is the investors' ability to absorb the risk, and hence, the
more the need to securitise.
For widely distributed securitised instruments, evaluation of the quality, and
its
certification by an independent expert, for example, rating is common. The
rating serves
for the benefit of the lay investor, who is not expected to appraise the risk
involved.
In case of securitisation of receivables, the concept of quality undergoes
drastic
change; making rating is a universal requirement for securitisations.
Securitisation is a
case where a claim on the debtors of the originator is being bought by the
investors.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 4/43
Hence, the quality of the claim of the debtors assumes significance. This at
times enables investors to rely on the credit rating of debtors (or a portfolio
of debtors) in the process make the instrument independent of the
oringators' own rating.
Dispersion of Product :
The basic purpose of securitisation is to disperse the product as much as
possible.
The extent of distribution, which the originator would like to achieve, is
based on a
comparative analysis of the costs and the benefits achieved. Wider
dispersion or
distribution leads to a cost-benefit in the sense that the issuer is able to
market the
product with lower return, and hence, lower financial cost to him. However,wide
investor base involves costs of distribution and servicing. In practice,
securitisation issues
are still difficult for retail investors to understand. Hence, most
securitisations have been
privately placed with professional investors.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 5/43
Homogeneity:
The instrument should be packaged as into homogenous lots for
marketabilty of
the product. Homogeneity, like the above features, is a function of retail
marketing. Most
securitised instruments are broken into lots affordable to the small marginal
investor, and
hence, the minimum denomination becomes relative to the needs of thesmallest investor.
Shares in companies may be broken into slices as small as Rs. 10 each, but
debentures
and bonds are sliced into Rs. 100 each to Rs. 1000 each. Designed for larger
investors,
commercial paper may be in denominations as high as Rs. 5 Lac. Other
securitisation
applications may also follow the same type of methodology.
Special purpose vehicle:
In case the securitisation involves any asset or claim which is direct and
unsecured claim on the issuer, the issuer will need an intermediary agency.It acts as a repository of the asset or claim, which is being securitised. In the
case of a secured debenture, it is a secured loan from several investors.
Here, security charge over the issuer's several assets needs to be integrated
and thereafter broken into marketable lots. For this purpose, the issuer will
bring in an intermediary agency whose function is to hold the security charge
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 6/43
on behalf of the investors. In turn, it issues certificates to the investors of
beneficial interest in the charge held by the intermediary. Thus, the charge
continues to be held by the intermediary, beneficial interest therein becomes
a marketable security. The same process is involved in securitisation of
receivables. The special purpose intermediary holds the receivables with it,
and issues beneficial interest certificates to the
investors.
Types of Securitizations
Securitization was initially used to finance simple, self liquidating assets such as
mortgages. But any type of asset with a stable cash flow can in principle be structured
into a reference portfolio that supports securitized debt. Securities can be backed not
only by mortgages but by corporate and sovereign loans, consumer credit, project
finance, lease/trade receivables, and individualized lending agreements. The generic
name for such instruments is asset-backed securities (ABS), although securitization
transactions backed by mortgage loans (residential or commercial) are called
mortgage- backed securities. A variant is the collateralized debt obligation, which uses
the same structuring technology as an ABS but includes a wider and more diverse
range of assets.
o mortgage loans ==> MBS
o consumer loans ==> ABS
o corporate loans ==> CLO
o corporate bonds ==> CBO
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 7/43
• Mortgage backed securities (MBS) were the first ones and are still the
most predominant type of securitization.
Cash Flow Types of Securitisation Structures ;
• There are three most common types of securitisations from the
perspective of cash flow:
Collateralized Debt, Pass-Through and Pay-Trough structures.
Collateralized debt
It is similar to asset-based borrowing.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 8/43
The owner of assets borrows money and pledges assets to secure
repayment. The assets pledged may be measured according to their
market value upon sale or their ability to
generate a cash flow stream. The debt instrument need not match the
cash flow configuration
of any of the assets pledged.
Pass through securitization
It is way to securitise assets with a regular cash
flow, by selling direct participations in the pool of assets. In other words, a
pass-through
certificate represents an ownership interest in the underlying assets and
thus in the resulting
cash flow. Principal and interest collected on the assets are “passed
through” to the
security holders; the seller acts primarily as a servicer.
A pay-through debt instrument
It is a borrowing instrument, not a participation.
Under the pay-through structure, the assets are typically held by a limited
purpose vehicle that issues debt collateralized by the assets. Like a pass-
through, the debt service is met by cash flow “paid through” to investors out
of the pledged collateral. Investors in a pay-through bond are not directowners of the underlying assets; they have simply invested in a bond backed
by some assets. Therefore, the issuing entity can manipulate
the cash flows, into separate payment streams. Thus pay-through
securities may be structured
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 9/43
so that asset cash flows can be reconfigured to support forms of debt
unlike those
•
• Parties and their Roles ;
The key parties involved in a securitisation and their roles3 are as
follows :
• _ Originator—
owner and “generator” of the assets to be securitised. Examples of
Originators are: banks and other financial institutions, corporates,
governments and
municipalities;
•
_ Seller—
seller of the assets to be securitised. In many cases, the Seller and the
Originator in a transaction are identical. This is however not
necessarily the case. For
instance, an entity may purchase assets from its affiliates and then act as
central Seller
in a securitisation;
_ Purchaser—
a special purpose vehicle (SPV) which purchases the assets to be
securitised.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 10/43
The Purchaser funds the purchase price by issuing asset-backed
securities into
the capital markets (in this capacity, the Purchaser is also referred to as
the Issuer);
• _ Servicer—
services the assets to be securitised (frequently the Originator retains
this
role). Where receivables are securitised, the Servicer will collect,
administer and, if
necessary, enforce the receivables;
• _ Back-up Servicer—
will service the assets in the event the Servicer is unable to service
them, or in the event the Purchaser exercises its right to remove the
Servicer (for
instance, as a result of the insolvency of the Servicer);
• _ Liquidity Facility Provider—
provides a liquidity facility in relation to certain tranches
of the asset-backed securities. Typically, a liquidity facility is provided in
conduit
transactions where the Purchaser issues revolving short-term commercialpaper to
fund the purchase of the assets. The Purchaser may draw upon the
liquidity facility if
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 11/43
it is unable to refinance maturing commercial paper because of a market
disruption.
The liquidity facility thus secures commercial paper investors against a
default in such
a case. Liquidity facilities are also sometimes required in standalone
securitisations;
• _ Investors—
purchasers of the asset-backed securities. Examples of investors in the
securitisation market are: pension funds, banks, mutual funds, hedge
funds, insurance
companies, central banks, international financial institutions and
corporates
• Lead Manager—
arranger and structurer of the transaction (in the context of conduit
transactions, also referred to as Programme Administrator). The Lead
Manager is
often the primary distributor of the asset-backed securities in a particular
transaction.
Individual distributors are also referred to as Managers;
• _ Rating Agencies—
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 12/43
rate the asset-backed securities. Some of the rating agencies in
securitisation are Standard & Poor’s, Moody’s Crisil , CARE etc
• _ Hedge Providers—
hedge any currency or interest rate exposures the Issuer may have;
• _ Cash Administrator—
provides banking and cash administration services to the
Issuer;
• _ Security Trustee—
acts as a trustee for the secured creditors of the Issuer (notably,
holds the Issuer’s assets granted to it as security for the Issuer’s
obligations, on behalf
of the Investors);
• _ Note Trustee—
acts on behalf of the holders of the asset-backed securities;
_ Auditors—
if necessary they audit the asset pool as may be required under the
documentation of the relevant transactions.
The securitization process;
In its most basic form, the process involves two steps (see chart).
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 13/43
In step one, a company with loans or other income-producing assets the
originator identifies the assets it wants to remove from its balance sheet
and pools them into what is called the reference portfolio. It then sells this
asset pool to an issuer, such as a special purpose vehicle (SPV)—an entity
set up, usually by a financial institution, specifically to purchase the assets
and realize their off-balance-sheet treatment for legal and accounting
purposes.
In step two, the issuer finances the acquisition of the pooled assets by
issuing tradable, interest-bearing securities that are sold to capital market
investors. The investors receive fixed or floating rate payments from a
trustee account funded by the cash flows generated by the reference
portfolio. In most cases, the originator services the loans in the portfolio,
collects payments from the original borrowers, and passes them on—less a
servicing fee—directly to the SPV or the trustee.
Disadvantage
BACK TO from bankruptcy of seller
• Originator retains no legal interest in assets Typically structured into
variousclasses/tranches, rated by one or more rating agencies
Reference portfolio(”collateral”) Senior tranche(s)Junior tranche
Underlying assets Issues asset-backed securities Issuing agent (e.g.,
special purpose vehicle [SPV]) Asset originator Capital market
investors Transfer of assets from the originator to the issuing vehicle
SPV issues debt securities (assetbacked) to investors Mezzanine
tranche(s).
Working of securitization; (diagramz)
Securitization represents an alternative and diversified source of finance
based on the transfer of credit risk (and possibly also interest rate and
currency risk) from issuers to investors.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 14/43
portfolio is divided into several slices, called tranches, each of which has a
different level of risk associated with it and is sold separately. Both
investment return (principal and interest repayment) and losses are
allocated among the various tranches according to their seniority. The least
risky tranche, for example, has first call on the income generated by the
underlying assets, while the riskiest has last claim on that income.
The conventional securitization structure assumes a three-tier security
design
junior
mezzanine,
senior tranches
This structure concentrates expected portfolio losses in the junior, or first
loss position, which is usually the smallest of the tranches but the one that
bears most of the credit exposure and receives the highest return. There is
little expectation of portfolio losses in senior tranches, which, because
investors often finance their purchase by borrowing, are very sensitive to
changes in underlying asset quality. It was this sensitivity that was the initial
source of the problems in the subprime mortgage market 2007. When
repayment issues surfaced in the riskiest tranches, lack of confidence spread
to holders of more senior tranches— causing panic among investors and a
flight into safer assets, resulting in a fire sale of securitized debt.
.Securitization started as a way for financial institutions and corporations to
find new sources of funding—either by moving assets off their balance
sheets or by borrowing against them to refinance their origination at a fair
market rate. It reduced their borrowing costs and, in the case of banks,
lowered regulatory minimum capital requirements. For example, suppose a
leasing company needed to raise cash. Under standard procedures, the
company would take out a loan or sell bonds. Its ability to do so, and the
cost, would depend on its overall financial health and credit rating.If it could
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 15/43
find buyers, it could sell some of the leases directly, effectively converting a
future income stream to cash. The problem is that there is virtually no
secondary market for individual leases. But by pooling those leases, the
company can raise cash by selling the package to an issuer, which in turn
converts the pool of leases into a tradable security.
Moreover, the assets are detached from the originator’s balance sheet (and
its credit rating), allowing issuers to raise funds to finance the purchase of
assets more cheaply than would be possible on the strength of the
originator’s balance sheet alone. For instance, a company with an overall “B”
rating with “AA”-rated assets on its books might be able to raise funds at an
“AA” rather than “B” rating by securitizing those assets. Unlike conventional
debt, securitization does not inflate a company’s liabilities. Instead it
produces funds for future investment without balance sheet growth.
Investors benefit from more than just a greater range of investible assets
made available through securitization. The flexibility of securitization
transactions also helps issuers tailor the risk-return properties of tranches to
the risk tolerance of investors. For instance, pension funds and other
collective investment schemes require a diverse range of highly rated long-
term fixed-income investments beyond what the public debt issuance by
governments can provide. If securitized debt is traded, investors can quickly
adjust their individual exposure to credit-sensitive assets in response to
changes in personal risk sensitivity, market sentiment, and consumption
preferences at low transaction cost. Sometimes the originators do not sell
the securities outright to the issuer (called “true sale securitization”) but
instead sell only the credit risk associated with the assets without the
transfer of legal title (“synthetic securitization”). Synthetic securitizationhelps issuers exploit price difference between the acquired (and often
illiquid) assets and the price investors are willing to pay for them (if
diversified in a greater pool of assets).
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 16/43
True sale securitization:
Put de diagram
The diagram shows a typical structure for a true sale securitisation. The
Originator (for instance a bank selling mortgages) sells certain assets (the
Assets) to the
Issuer. The Assets will be serviced by the Servicer (often the Originator), for
instance with
respect to mortgages sold to the Issuer, the Originator will continue, on
behalf of the
Issuer, to collect principal and interest from borrowers on such mortgages
and will,
where appropriate, take enforcement action in respect of such default
mortgages.
As the Issuer has no employees it will appoint a Cash Administrator to make
all relevant
payments on its behalf and is also likely to app The Issuer funds the
purchase of those assets by selling asset-backed securities (whose
performance is dependent on the performance of the Assets) (the Bonds)
to the Managers who will in turn sell those securities to the Investors.
Investors will be free to sell the Bonds or retain them.
Synthetic securitization ;
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 17/43
It is very similar to a “true sale” and most of the structural features are the
same.
The key difference is that the Originator does not sell any assets to the
Issuer (and therefore, does not obtain any funding or liquidity under the
transaction). Instead the Originator will enter into a credit default swap
with the Issuer in respect of an asset or pool of assets. Under this contract
the Issuer will pay the Originator an amount equal to any credit losses
suffered in respect of such asset or pool of assets (less a minimum
threshold amount—similar to an “excess” in insurance). The Originator’s
exposure to those assets is therefore transferred to the Issuer. The
Originator in return will pay a fixed amount to the Issuer, usually on aquarterly basis. The Issuer will issue Bonds to Investors via the Managers.
The Issuer’s ability to repay principal and pay interest under the Bonds
will depend on whether the Issuer has to make payments under the credit
default swap. The Issuer’s income streams in a synthetic transaction are
the fixed amounts paid by the Originator under the credit default swap
and interest amounts received on the collateral. In order to collateralise
its obligations under the credit default swap and the Bonds the Issuer
usually purchases securities as collateral. These are normally highly rated
government debt securities. They also need to be relatively liquid in order
that they can be sold and the proceeds used to pay amounts under the
credit default swap or Bonds.
“Whole Business” Securitisation ;
This type of securitisation originated in the United Kingdom. It involves the
provision of a secured loan from an SPV to the relevant Originator. The
SPV issues bonds into the capital markets and lends the proceeds to the
Originator. The Originator services its obligations under the loan through
the profits generated by its business. The Originator grants security over
most of its assets in favour, ultimately, of the Investors. “Whole business”
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 18/43
securitisation is sometimes used to finance a taking private or
management buy out of the originator.
Advantages;
Securitisation is one way in which a company might go about financing its
assets.
Reasons for companies to go for securitisation :
1. to improve their return on capital, since securitisation normally requires
less capital to
support it than traditional on-balance sheet funding;
2. to raise finance when other forms of finance are unavailable (in a
recession banks are often unwilling to lend - and during a boom, banks often
cannot keep up with the
demand for funds);
3. to improve return on assets - securitisation can be a cheap source of
funds, but the
attractiveness of securitisation for this reason depends primarily on the costs
associated with alternative funding sources;
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 19/43
4. to diversify the sources of funding which can be accessed, so that
dependence upon
banking or retail sources of funds is reduced;
5. to reduce credit exposure to particular assets (for instance, if a particular
class of
lending becomes large in relation to the balance sheet as a whole, then
securitisation
can remove some of the assets from the balance sheet);
6. to match-fund certain classes of asset - mortgage assets are technically
25 year assets, a proportion of which should be funded with long term
finance; securitisation
normally offers the ability to raise finance with a longer maturity than is
available in
other funding markets;
7. to achieve a regulatory advantage, since securitisation normally removescertain risks which can cause regulators some concern, there can be a
beneficial result in terms of the availability of certain forms of finance (for
example, in the UK building societies consider securitisation as a means of
managing the restriction on their wholesale funding abilities).
. Economic impact of securitisation:
Securitisation is necessary to the economy similar to organized markets
.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 20/43
1. Creates of markets in financial claims:
By creating tradeable securities out of financial claims, securitisation helps to
create markets in claims, which would, in its absence, have remainedbilateral deals. In
the process, securitisation makes financial markets more efficient, by
reducing
transaction costs.
2. Spread of holding of financial assets:
The basic intent of securitisation is to spread financial assets amidst as many
savers as possible. the security is designed in minimum size
marketable lots as necessary. Hence, it results into dispersion of financial
assets. One
should not underrate the significance of this factor just because institutional
investors
have lapped up most of the recently developed securitisations. Lay investors
need a
certain cooling-off period before they understand a financial innovation.
3. Promotion of savings:
The availability of financial claims in a marketable form, with proper
assurance as
to quality in form of credit ratings etc., securitisation makes it possible for
the simple
investors to invest in direct financial claims at attractive rates. If the bank
rate are lower
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 21/43
than the rates offered by securities, investors will go for these instruments.
4 Reduces costs:
Securitisation tends to eliminate fund-based intermediaries, and it leads to
specialization in intermediation functions. This saves the End-user Company
from
intermediation costs, since the specialized-intermediary costs are service-
related, and
comparatively lower
.
5 Risk diversification :
Financial intermediation is a case of diffusion of risk because of accumulation
by
the intermediary of a portfolio of financial risks. Securitisation spreads
diversified risk toa wide base of investors, with the result that the risk inherent in financial
transactions is
diffused.
6 Focuses on use of resources, and not their ownership:
Once an entity securitises its financial claims, it ceases to be the owner of such
resources and becomes merely a trustee or custodian for the several
investors who
thereafter acquire such claim. Imagine the idea of securitisation being
carried further, and not only financial claims but claims in physical assets
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 22/43
being securitised, in which case the entity needing the use of physical assets
acquires such use without owning the property. The property is diffused over
investors. In this sense, securitisation process assumes the role of a trustee
of resources and not the owner.
Social benefits of Securitisation:
Securitisation does is to break a company, a set of various assets, into
various
subsets of classified assets, and offer them to investors. In situation without
securitisation: each investor would be taking a risk in the unclassified,composite
company. How can we call this as serving economic benefit if the company is
made into
different parts and sold to different investors?
consider an imaginary holding company ABCLtd. It has on its balance sheet
three wholly-owned subsidiaries, A, B, and C. The process of securitisation
can be thought of as treating distinguishable pools of assets as if they were
the wholly-owned subsidiaries, A, B and C.
Lets make the following assumptions about the subsidiaries A, B and C.A is
100% debt financed (5-year debentures issued at 9%) with its only asset a
single 5-year
loan to an AAA-rated borrower paying 10%. B is a software company with no
earnings or performance history, but with projections for attractive, volatile,
future earnings. C is a
well-known manufacturing company with predictable earnings.
If ABC goes to the debt markets seeking additional unsecured funding,
potential
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 23/43
investors would face the difficult task of evaluating its assets and assessing
its debt
repaying abilities. The assessed cost of marginal ABC borrowing might
consist of an
"average" of the calculated returns on the assets of the segments that
comprise ABC. This average would necessarily reflect known and unknown
synergies, and costs and
associative risks arising from the collective ownership parts (i.e., the group's
imputed
contribution for credit support, insolvency risk and liability recourse) and
would likely
include an "uncertainty" discount.
Now consider the probable outcomes if ABC are to legally sell the ownership
of
one or more of its "parts." In exchange for the exclusive rights to the cash
flows from A,
investors would return to ABC maximum equivalent value in the form of
cash. Such anoffering appeals to a wide range of investors. This includes investors with a
preference
for, and having superior information regarding the risk represented by A's
obligors.
Those new investors who have had an aversion for the risk presented by the
associated
costs and risks represented by B and C. This new arrangement returns to
ABC is the full
value the market attaches to the certainty of the information concerning A,
without
uncertainty of the information regarding Band C. The value of the resulting
ABC shares
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 24/43
depends in part on the disposition of the cash received from the spin-off. If
ABC retains
the cash, there may be a discount or revaluation resulting from the market's
assessment of
ABC's ability to achieve a return equal or better than it would have earned
from keeping
the asset. There is always one clear collateral benefit to the resulting ABC
that derives
from any divestment. The perceived value of the remaining components are
relieved of
any previously imposed discount for the disposed component's credit
support and
insolvency risk. Holding aside separate considerations of corporate strategy
and internal
synergies, to the extent that the consideration received from the divestment
improves (in the perception of the market) the capital structure of the
resulting ABC and/or reduces the marginal funding cost for the resulting
organization ABC. The decision to divest or securitise is simplified. If the
information held by ABC concerning any of its segments is not or cannot befully disclosed, or when disclosed will not be fully or accurately valued, the
correct decision is to retain the asset. Without securitisation, ABC's bank
faces significant and largely irreducible costs of evaluating the marginal
impact on ABC's borrowing cost from ABC's pledging of assets (receivables)
and of evaluating similar information for each other borrower that the lender
or finances. If the imposed cost of borrowing is to be judged solely on the
assets as we have seen, the most efficient way to assess the true cost of
asset based borrowing). Evaluating each pool of assets and assessing the
likelihood that the cash flows from them will be uninterrupted must be
repeated for each borrowing.
By developing a market for asset-specific expertise (not the least of which is
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 25/43
represented by the expertise of the rating agencies), and by relying on the
capital markets to determine the best price for the rated asset-backed
securities (such rating representing the expression of the information
provided by the developed expertise), the cost of borrowings for issuers
using properly organized securitisation structures has steadily decreased and
is well below the cost of borrowing from a lending institution.
DISADVANTAGES;
Risks to investors
Liquidity risk
Credit/default: Default risk is generally accepted as a borrower’s inability to meet
interest payment obligations on time. For ABS, default may occur when maintenance
obligations on the underlying collateral are not sufficiently met as detailed in its
prospectus. A key indicator of a particular security’s default risk is its credit rating.
Different tranches within the ABS are rated differently, with senior classes of most
issues receiving the highest rating, and subordinated classes receiving correspondingly
lower credit ratings.
However, the credit crisis of 2007-2008 has exposed a potential flaw in the
Securitisation process - loan originators retain no residual risk for the loans they make,
but collect substantial fees on loan issuance and Securitisation, which doesn't
encourage improvement of underwriting standards. The subprime mortgage crisis
that began in 2007 has given the decades-old concept of securitization a bad
name. Securitization is the process in which certain types of assets are
pooled so that they can be repackaged into interest-bearing securities. The
interest and principal payments from the assets are passed through to the
purchasers of the securities. Securitization got its start in the 1970s, when
home mortgages were pooled by U.S. government-backed agencies. Starting
in the 1980s, other income-producing assets began to be securitized, and in
recent years the market has grown dramatically.In some markets, such as
those for securities backed by risky subprime mortgages in the United
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 26/43
States, the unexpected deterioration in the quality of some of the underlying
assets undermined investor confidence. Both the scale and persistence of
the attendant credit crisis seem to suggest that securitization—together with
poor credit origination, inadequate valuation methods, and insufficient
regulatory oversight—could severely hurt financial stability. Increasing
numbers of financial institutions employ securitization to transfer the credit
risk of the assets they originate from their balance sheets to those of other
financial institutions,such as banks, insurance companies, and hedge
funds.They do it for a variety reasons. It is often cheaper to raise money
through securitization, and securitized assets were then less costly for banks
to hold because financial regulators had different standards for them than for
the assets that underpinned them. In principle, this “originate and distribute”
approach brought broad economic benefits too—spreading out credit
exposures, thereby diffusing risk concentrations and reducing systemic
vulnerabilities.
Until the subprime crisis unfolded, the impact of securitization appeared
largely to be positive and benign. But securitization also has been indicted
by some for compromising the incentives for originators to ensure minimum
standards of prudent lending, risk management, and investment, at a time
when low returns on conventional debt products, default rates below the
historical experience,and the wide availability of hedging tools were
encouraginginvestors to take more risk to achieve a higher yield. Many of the
loans were not kept on the balance sheets of those who securitized them,
perhaps encouraging originators to cut back on screening and monitoring
borrowers, resulting possibly in a systematic deterioration of lending and
collateral standards.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 27/43
Event risk
Prepayment/reinvestment/early amortization: The majority of revolving ABS are
subject to some degree of early amortization risk. The risk stems from specific early
amortization events or payout events that cause the security to be paid off prematurely.Typically, payout events include insufficient payments from the underlying borrowers,
insufficient excess Fixed Income Sectors: Asset-Backed Securities spread, a rise in the
default rate on the underlying loans above a specified level, a decrease in credit
enhancements below a specific level, and bankruptcy on the part of the sponsor or
servicer.
Currency interest rate fluctuations: Like all fixed income securities, the prices of fixed
rate ABS move in response to changes in interest rates. Fluctuations in interest rates
affect floating rate ABS prices less than fixed rate securities, as the index against which
the ABS rate adjusts will reflect interest rate changes in the economy. Furthermore,
interest rate changes may affect the prepayment rates on underlying loans that back
some types of ABS, which can affect yields. Home equity loans tend to be the most
sensitive to changes in interest rates, while auto loans, student loans, and credit cards
are generally less sensitive to interest rates.
Contractual agreements
Moral hazard: Investors usually rely on the deal manager to price the Securitisations’
underlying assets. If the manager earns fees based on performance, there may be a
temptation to mark up the prices of the portfolio assets. Conflicts of interest can also
arise with senior note holders when the manager has a claim on the deal's excess
spread.
Servicer risk: The transfer or collection of payments may be delayed or reduced if the
servicer becomes insolvent. This risk is mitigated by having a backup servicer involvedin the transaction.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 28/43
Securitisation and financial disintermediation:
Securitisation used to result into financial disintermediation. If we imagine a
financial world without intermediaries, all financial transactions will be
carried only as
one-to-one relations. For example, if a company needs a loan, if will have to
seek such
loan from the lenders, and the lenders will have to establish a one-to-one
relation with the company. Each lender has to understand the borrowing
company, and to look after his loan. This is difficult process in modern worldof business. There is a financial
intermediary, such as a bank, pools funds from many such investors. It uses
these funds to lend to the company. If the company securitises the loan, and
issue debentures to the investors eliminating the need for the intermediary
bank. Since the investors may now lend to the company directly in small
amounts each, in form of a security, which is easy to appraise, and which is
liquid.
Utilities added by financial intermediaries:
A financial intermediary initially came into existence to avoid the difficulties
in a
direct lender-borrower relation between the company and the investors. the
difficulties that will be addressed by the financial intermediary are as follows;
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 29/43
(a) Difficulty of transactions: An average small investor would have a small
amount of
sum to lend whereas the company's needs would be massive. The
intermediary bank
pools the funds from small investors to meet the needs of the company. The
intermediary may issue its own security, of smaller value.
(b) Non availability of information: An average small investor would
either not be
aware of the borrower company or would not know how to appraise or
manage the loan.
The intermediary fills this gap.
(c) Risk perception of Risk : The risk as investors perceive in investing in a
bank may be much lesser than that of investing directly in the company,
though in reality, the financial risk of the company is transposed on the
bank. However, the bank is a pool of several such individual risks, and hence,
the investors' preference of a bank to the borrower company can be
understood easily.
Securitisation of the loan into bonds or debentures addresses all the three
difficulties in
direct exchange between borrower and lender. It avoids the transactional
difficulty by
breaking the lumpy loan into marketable lots. It avoids informational
difficulty because
the securitised product is offered generally by way of a public offer, and its
essential
features are disclosed. It avoids the perceived risk difficulty, since the
instrument is
generally well secured and generally rated for the investors' satisfaction.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 30/43
Securitisation changes the function of intermediation:
It is true to say that securitisation leads to better disintermediation for its
advantage. Disintermediation is one of the important aims of present-day
organizations,
since by skipping the intermediary, the company intends to reduce the cost
of its finances.
Securitisation has been employed to disintermediate.
However, it is important to note that securitisation does not eliminate theneed for
the intermediary. It redefines the intermediary's role. In the above example,
if the
company in the above case is issuing debentures to the public to replace a
bank loan, is it
eliminating the intermediary altogether? No. Would be avoiding the bank as
an
intermediary in the financial flow, but would still need the services of an
investment
banker to successfully conclude the issue of debentures.
Therefore, securitisation changes the basic role of financial intermediaries.
Financial intermediaries have emerged to make a transaction possible by
performing a
pooling function, and have contributed to reduce the investors' perceived
risk by
substituting their own security for that of the end user. Securitisation puts
these services
of the intermediary in a background by making it possible for the end-user to
offer these
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 31/43
features in form of the security. In this case, the focus shifts to the more
essential function
of a financial intermediary. That is distribution a financial product. For
example, in the
above case, where the bank being the earlier intermediary was eliminated
and instead the
services of an investment banker were sought to distribute a debenture
issue. Thus, the
focus shifted from the pooling utility provided by the banker to the
distribution utility
provided by the investment banker.
Securitisation seeks to eliminate funds-based financial intermediaries by fee-
based
distributors. In the above example, the bank was a fund-based intermediary,
a reservoir of
funds, whereas the investment banker was a fee-based intermediary, a
catalyst, and a
pipeline of funds. Hence, with increasing trend towards securitisation, the
role of feebasedfinancial services has been brought into the focus. In case of a direct loan,
the
lending bank was performing several intermediation functions. It is a
distributor in the
sense that it raised its own finances from a large number of small investors.
It is
appraising and assessing the credit risks in extending the corporate loan,
and having
extended it, it manages the same. Securitisation splits each of these
intermediary
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 32/43
functions apart, each to be performed by separate specialized agencies. The
investment bank, appraisal function, will perform the distribution function by
a credit-rating agency
and management function possibly by a mutual fund that manages the
portfolio of
security investments by the investors. Hence, securitisation replaces fund-
based services
by several fee-based services.
Securitisation: changing role of banking systems
Banks are increasingly facing the threat of disintermediation. In a world of
securitized assets, banks have diminished roles. The distinction between
traditional bank lending and securitized lending clarifies this situation.
Traditional bank lending has four functions:
originating;
funding,
servicing and
monitoring.
Originating means making the loan, funding implies that the loan is held on
the balance sheet. Servicing means collecting the payments of interest and
principal, and monitoring refers to conducting periodic surveillance to ensure
that the borrower has maintained the financial ability to service the loan.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 33/43
Securitized lending introduces the possibility of selling assets on a bigger
scale and eliminating the need for funding and monitoring. The securitized
lending function has only three steps: originate, sell, and service. This
change from a four-step process to a three-step function has been described
as the fragmentation or separation of traditional lending.
Securitisation of Loans
The concept of Securitisation of loans has been codified through the
Securitization Act 2002 and this has proved to be the engine—room in the
present day financial market. With this apparatus the banks and financial
institutions can pass off their risks of unpaid debts but the risk only goes off
from the individual institutions and not from the financial system. Therefore
there is a possibility that the same might strike back again.
The banking sector in India is growing very fast and its escalation has
contributed substantially in the progress of the country’s financial market.
Basic function of banks is to work as a financial intermediary by accepting
deposits and giving out loans, Lending is part and parcel of the banking
industry. loan is an amount of money advanced to the borrower for a
stipulated time period and while repaying the amount the borrower is
required to pay certain additional amount which is termed as interest. Such
interest is nothing but the cost of money being used for that time period.
kinds of loans, secured and unsecured. Unsecured loans are advanced
without any security but in case of secured loans banks retain securities in
the order of real estate, machinery and the like. The main object of keeping
hold of security is to ensure that if the borrower makes a default then such
security can be realized at the meeting of the deficiency.
However this system was not satisfactory as the convulsion of those real
estates and translation into liquid assets seemed impossible because of the
legal complicatedness as well as the sloth of our judicial system. It took
years for the banks to liquefy the security assets and appreciate the sum of
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 34/43
deficiency. Hence to trounce this difficulty the Parliament had enacted
Recovery of Debts Due To Banks and Financial Institutions Act, 1993
(hereinafter referred to as Debt Recovery Act). This Act created a separate
apparatus in the order of Debt Recovery Tribunals which were devolved with
the responsibility of administering disputes pertaining non payment of debts.
However one may say that this legislation was generic in nature and could
not adjust with every corner of the changing trends of financial market.
Hence it was imperative for the legislature to devise an even more
unconventional device for the enforcement of rights of bankers and financial
institutions as lenders.
Consequently the Parliament acted out Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (hereinafter referred to as Securitization Act). The Act is
nothing but the fructification of Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Ordinance
which was promulgated by the president in the year 2002 itself. This Act
came into existence when in the financial market loans are started being
treated like tradable securities. This Act has been passed in the year 2002.
Section 2(f) of this Act defines ‘borrower’ as a person who has taken financial
assistance form any bank or financial institution in exchange of certain
security in the order of mortgage, pledge or guarantee. Under section 2(j)
‘default’ would mean non payment of any principal debt or interest thereon.
Under section 2(zd) of this Act the banks and financial institutions as well as
any consortium arrangement are regarded as secured creditors.
Securities are generally classified into three categories
1.directly tradable in the market in a profitable manner
2. not directly tradable but the banks however can sell them in
lesser profit and
3. not at all tradable.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 35/43
The use of securitization process is meant for the third group of assets.
In securitization process there are mainly two crafts: the original lender
and a Special Purpose Vehicle (SPV). The SPV helps the original lender in
liquefying the assets. The SPV converts these assets into marketablesecurities for investment and the cash flows to the original lender. This helps
the original lender in meeting up the deficiency which arose out of the
borrowers default. Apart from original lender and SPV, other parties involved
in securitization process are merchant or investment banker, credit rating
agency, servicing agency and the buyers of securities.
INCLUDE IN DE CONCLUSION (As far as India is concerned the
advantages that securitization of loans may accrue is interesting. In aneconomy which is growing and in need of more capital, securitization helps
in managing the limited capital efficiently. The commercial banks can
reallocate their risks in a planned manner improving their credit and
operating system. The investors are in an incessant enthusiasm for having
more assets and this hunger can be bespoken by asset securitization. In long
and medium stages securitization method is at the prospect of advancing the
classiness standards of the banking as well as the financial institutions. In
short the system of securitization can prove to be a vehicle for the
augmentation of domestic savings as well as attracting overseas
investments which might be imperative in the infrastructural enlargement of
the country.
The process of securitization of loans has led India to witness a vogue in
the banking sector. This fad may be termed something like belligerent
banking. This is presently the guiding gospel of the banking sector. This is so
because banks earn profit mainly form loans and lending involves a great
deal of risk. Before providing loans the banker has to think twice, take a lot
of factors into contemplation and apprise a lot of things. Furthermore there is
always an atmosphere of worry about the repayment and finally a lot of
accountability as these institutions are to deal with the public money. But
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 36/43
with the surfacing of securitization of loans there is a feeling of security in
the banking sector and it has tutored the banks not to behave like their
traditional brothers and to expand instead. The driving force behind this
changing concept is loans being treated like tradable securities to be
packaged, sold and forgotten about. In this way securitization has emerged
as the as the engine room of the financial market.
Form the above forethought one may come to the outlook that
securitization of loans is all right and there is no predicament. However if
analysed in a different manner then there is one potential dilemma. This
quandary comes when we think about securitization not from the perspective
of individual financial instauration but from the standpoint of the financial
system as a whole. We have already discussed previously that now a day
isolationism has no place to function and hence things to be considered
globally. Thus the debate in which we partake is not from the point of view of
our own financial system but the universal one. This is because our country
has already made a take off from isolationism and in the process of being
more integrated with the global economic order. Therefore when one
scrutinizes the concept of securitization of loans then he/she may face with
the difficulty as to securitization of what—the individual institutions or the
financial system as a whole.
The securitization of loans facilitates the original lender thinking that he is
sticking to an opportune position which will abet him to transmit the
jeopardy to the other investors and with this process the originator can
getaway capital sufficiency requirements. But the hazard which
securitization wants to avoid does not disappear from the financial system
altogether. The securitization or reconstruction companies which buy and
invest the securities engage themselves in a highly risk prone business and
hence they have to highly depend again on the commercial banks for the
supply of the required credits. Therefore incongruously the commercial
banks are again driven to foster the business of these investors which
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 37/43
undertake a risky game. Thus an unseemly assessment of risk may result the
peril might knock the door of the originator once again. For this reason the
risk does not ebb from the system on the whole and in the natural course of
financial market the same may trouble again. Therefore the decease that
securitization wants to cure remains as it is and merely changes its position
from one to another actor in the market.
We need to bear this in mind that concept of banking is no longer a new
one. We can find its traces in the medieval history also. However at that time
banking was identified with money lending only. Now a day though banking
is not only institutionalized money lending system but money lending and
profit making forms the base for which the banks are meant for. It is not that
banks have started giving loans only after the advent of securitization
process. Lending was there even though the theme of securitization was
absent. During that time the banks used to follow something what we call
Principles of Good Lending or Fundamental Principles of Banking Business.
These principles were regarded sound in the banking business and included
proper disclosure of documents by the customers so that there is no bar in
proceeding with the loan, actual assessment of customer’s repayment
capability ensuring the due return in due time, rigid regulations to prevent
hoodwinked and corrupt practices, a supervisory monitoring system and
finally less formal techniques to promote best practices.
Therefore to conclude with we must say that though we are standing on a
time where the financial market is at its boom with the fast growth of the
banking sector, we should not forget the basic values that is in continuation
since long. These principles should not be discarded after the danger being
shown. The Securitization Act indeed is a milestone but this is not to be
extended so as to taking away the elementary dogma. In many of the cases
the judges heard stating that the old precedents should not be held
redundant just because they are old. They should be weighed in their own
merits. Such benchmark can only be rejected when it is established that they
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 38/43
can not be borne any more and hence they are out-modeled. This inherent
principle can also be applied to the emerging concept of credit securitization.
It may not be possible to think that the fundamental principles of banking are
of no use today. Hence securitization can be an appendage to these
principles and not all in all a substitute)
Capital markets role in securitisation:
The capital markets have provided the needed impetus to disintermediation
market.
Professional and publicly available rating of borrowers has eliminated theinformational
advantage of financial intermediaries. Let us imagine a market without rating
agencies:
any investor has to take an exposure security has to appraise the entity.
Therefore, only
those who are able to employ analytical skills will be able to survive.
However, the
availability of professionally conducted ratings has enabled small investors to
rely on the
rating company's professional judgement and invest directly in the security
instruments
rather than to go through intermediaries. But this should not be construed as
no role for
banker.The development of capital markets has re-defined the role of bank
regulators. A
bank supervisory body is concerned about the risk concentrations taken by a
bank. More the risk undertaken, more is the requirement of regulatory
capital. On the other hand, if the same assets were to be distributed through
the capital market to investors, the risk is divided, and the only task of the
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 39/43
regulator is that the risk inherent in the product is properly disclosed. The
market sets its own price for risks - higher the risk, higher the return
required. Capital markets tend to align risks to risk takers. Free of constraints
imposed by regulators and risk-averse depositors and bank shareholders,
capital markets efficiently align risk preferences and tolerances with issuers
(borrowers) by giving providers of funds (capital market investors) only the
necessary and preferred
information. Other features of the capital markets frequently offset any
remaining
informational advantage of banks: variety of offering methods, flexibility of
timing and
other structural options. For borrowers able to access capital markets
directly, the cost of capital will be reduced according to the confidence that
the investor has in the relevance and accuracy of the provided information.
As capital markets become more complete, financial intermediaries become
less important as touch points between borrowers and savers. They become
more important as specialists that
(1) complete markets by providing new products and services,
(2) transfer and distribute various risks via structured deals, and(3) Use their reputational capital as delegated monitors to distinguish
between high- and
low-quality borrowers by providing third-party certifications of
creditworthiness.
These changes represent a shift away from the administrative structures of
traditional
lending to market-oriented structures for allocating money and capital.
In this sense, securitisation is not really-speaking synonymous to
disintermediation, but
distribution of intermediary functions amongst specialist agencies.
Securitisation and structured finance:
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 40/43
securitization is a "structured financial instrument". It
is a financial instrument structured or tailored to the risk-return and maturity
needs of the
investor, rather than a simple claim against an entity or asset. the term-
structured finance is to refer to such financing instruments where the
financier does not look at the entity as a risk. He tries to align the financing
to specific cash accruals of the borrower. On the investors side,securitisation
seeks to structure an investment option to suit the needs of investors.
Itclassifies the receivables/cash flows not only into different maturities but
also into senior,mezzanine and junior notes. Therefore, it also aligns the
returns to the risk requirements
of the investor.
Securitisation as a tool of risk management:
Securitisation is more than just a financial tool. Banks generally work for risk
removal.
Securitisation but also permits bank to acquire securitized assets with
potential
diversification benefits. When assets are removed from a bank's balance
sheet, all the
risks associated with the asset are eliminated. In the process reduces the
risks of the bank.
Credit risk and interest-rate risk is the essential uncertainties that concern
domestic
lenders. By passing on these risks to investors, or to third parties when credit
enhancements are involved, financial firms are better able to manage their
risk exposures.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 41/43
In today's banking, securitisation is increasingly being resorted to by banks,
along with
other innovations such as credit derivatives to manage credit risks.
Comparison of Securitisation and credit derivatives:
Credit derivatives are logical extension of the concept of securitisation. A
credit
derivative is a non-fund-based contract when one person agreed to
undertake, for a fee,
the risk inherent in a credit without acting taking over the credit. The risk
either could be
undertaken by guaranteeing against default or by guaranteeing the total
expected returns
from the credit transaction. While the former could be another form of
traditional
guarantees, the latter is the true concept of credit derivatives. Thus, if one
bank has a
concentration in say Iron and Steel segment while another bank has
concentration in
Textiles, the two can diversify their risks, without actually taking financial
exposure, by
engaging in credit derivatives. One can agree to guarantee the returns of
other from a part of its Iron and Steel exposures, and reverse can also take
place. Thus, the first bank is earning both from its own exposure in Iron and
Steel, as also from the fee-based exposure it has taken in Textiles.
Credit derivatives were logically the next step in development of
securitisation.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 42/43
Securitisation development was premised on credit being converted into a
commodity. In the process, the risk inherent in credits was being
professionally measured and rated. In the second step, one would argue that
if the risk can be measured and traded as a
commodity with the underlying financing involved, why can't the financing
and the credit
be stripped as two different products?
The development of credit derivatives has not reduced the role for
securitisation:
it has only increased the potential for securitisation. Credit derivatives is only
a tool for
risk management: securitisation is both a tool for risk management as also
treasury
management. Entities that want to go for securitisation can easily use credit
derivatives as
a credit enhancement device, that is, secure total returns from the portfolio
by buying a
derivative, and then securitise the portfolio.
.
Bibliography
1. The Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002.
2. Tanan, M.L. ‘Tanan’s Banking Law and Practice in India’, Wadhwa
and Wadhwa, 21st
Edition, 2005.
3. Ghosh, D.N. ‘Aggressive Banking and Passive Regulation’,
Published in Economic and Political Weekly, Sameeksha Trust
Publication, Vol. XLII, No.35.
7/29/2019 Securitisation of Loans
http://slidepdf.com/reader/full/securitisation-of-loans 43/43
4. Jain, Shantimal. ‘Securitisation Law—Scrutinized’, (2004) JULY PL
(Jour) 22. Eastern Book Company.
5. Kaufman, Henry. ‘Our Risky New Financial Markets’, Published in
Wall Street Journal, Wednesday, August 15, 2007, page A 13.
6. Adukia, Rajkumar. S. ‘Securitization an Overview’, retrieved from:
http://icai.org/icairoot/publications/complimentary/cajournal_feb05/feb
05978-985.pdf . Visited on 7th October 2007.
7. Shiva, G. ‘Securitization of Debt’, retrieved from:
http://www.iief.com/Research/debt_chp21.pdf Visited on 7th October
2007.
8. Mahapatra, Soumya. S. ‘Securitisation: A Boon for the Banking
Sector’, published in www.legalserviceindia.com, visited on 7th
October 2007.
9. Bernanke, Ben S. ‘The Housing Market and Subprime Lending’,
The 2007 International Monetary Conference, Cape Town, South Africa,
June 5, 2007, retrieved from:
http://www.federalreserve.gov/newsevents/speech/bernanke20070605
a.htm, visited on 15th November 2007.