I’ve been tasked with writing a paper in 8 days time – the question is this:
“Critically discuss the nature, purpose and effect of securitisation. In doing so, you should, amongst other things, refer to the structure of a securitisation, and the sorts of problems that may arise”.
My current understanding of the topic is this:
1. Nature of Securitisation
What is securitisation
2. Purpose of Securitisation
What is the objective/goal of securitisation
Reason why organisations do securitisations
3. Effect of Securitisation
The result/outcome of securitisation
Interplay with the capital markets
Benefit to society and economy
Flow of liquidity
Global financial Crisis and how securitisation significantly inflated the problem
Open to abuse – credit ratings agencies/government/financial institutions (all in bed with each other due to being financially blinkered and self interested)
5. Structure of a securitisation
The basic structure
Transferring the receivables
Security and risk
Cash flow in the structure
The role of ratings agencies
6. Other securitisation structures
A description of variations to the standard securitisation structure, including variations on how the securities are issued and the type of SPV used.
Also, credit default swaps, trusts.
There is also the issue of “true sale”
7. New EU Regulation on securitisation
8. Basel III
Not too sure what else there is. I'm particularly struggling with the problems that arise section. If anyone has any thoughts on this, the structure or indeed anything I have missed, please get in touch as it would be much appreciated.
Many thanks, R.