The process of securitization

Asset securitization reduces the riskiness of the bank, improves the quality of assets, allows to increase ceteris paribus indicators of capital adequacy. In the process of securitization involves several parties: the bank as the initiator of the sales package of loans, a company that deals with issue of securities; guarantor (insurance company), investors (individuals or legal entities) who purchase securities in the market. The procedure begins with the securitization of the bank, which initiated the sale of loans, enter into an agreement with the total amount of securitized loans make the issuance of securities. Before placing the package of securities in the market the issuing company must be supported by the guarantor, which performs the function of insurance issued securities. Often this support is provided in the form of government guarantees or a large bank. Consequently securities are marketed, and received from the sale of funds start coming to the guarantor and the issuing company, which transmit them to the bank-initiator. Thus, the bank gets cash for a total amount of securitized loans. The Bank continues to service these loans (which become engagements of the bank), ie perform calculations with borrowers to obtain funds from repayment of principal Topic: Risks in Banking | Tags: the level of riskiness