Securitisation is a financing technique that consists of transferring assets, including commercial outstandings (unsettled invoices, etc.) or loans receivable (consumer credit, car loans, leasing, revolving credit card loans or even home loans, etc.) to investors.
In the case of long-term issues (ABS), these outstandings are transformed into financial securities issued on capital markets through a special purpose vehicle (issuer, etc.).
These securities entitle investors to payments when invoices are settled (commercial outstandings) or monthly payments for loans. Holders of these securities recover their investment in the form of a repayment of the principal and interest, under conditions set out for each tranche.
Interest for investors
- Historical performance of these products always in line with tranche expectations/ratings
- Seeking yields in a context of low rates and ample liquidity
- Alignment of interests and initiatives aiming to improve market visibility (PCS quality label)
Interest for issuers
- Diversification of financing tools
- Indirect source of liquidity by using it as collateral for central bank liquidity operations or for private repo transactions
- Alignment of interests
Interest for financing the economy
- Helps finance credit for key sectors (SMEs and consumer credit in particular) by giving non-banking investors access (insurers, fund managers, etc.)
- A tool for deconsolidating banks' balance sheets so they can continue lending to the real economy