Securitisation is the process whereby an entity (originator) sells in the market illiquid and non-tradable assets in exchange for cash (the so-called "traditional securitisation" or "true sale securitisation") or sells only the credit risk associated with the assets (also called "synthetic securitisation"). The term securitisation derives from the core objective of the transaction, which is to obtain securities from the underlying instruments in the pool being securitised. The securitisation process includes further participants and is divided in two basic steps1. Firstly, the originator identifies the reference portfolio, a pool of assets it wants to remove from its balance sheet, and sells it to a bankruptcy-remote or insolvency-remote special purpose entity (SPE), also called special purpose vehicle (SPV). The main objective of this transaction is to obtain cash (to achieve a common cash flow pattern, the securitised assets shall have a sufficient degree of homogeneity). The creation of an SPV ensures the legal isolation of the assets from the other assets of the originator. In other words, the assets that have been transferred to the SPV will not be affected by the bankruptcy or insolvency risk of the originator. The SPE (or a trust to which the SPV transfers the assets) issues and sells tradable interest-bearing securities in the public and private markets. The purpose of the transaction is to finance the originator’s assets acquisition. The target investors are generally institutional investors, including banks, insurance companies, pension plans and portfolio managers among others. At this stage, further entities may participate in the process: a rating agency, to assess the credit quality and other characteristics of the securities issued by the SPE; an underwriter or placement agent (the "underwriter") that advices on the structure of the transaction, to allocate efficiently the securities to each class of investors. The securities that are sold to the investors are generally referred to as "asset-backed securities" or "ABS", and they can be classified according to the underlying financial asset of the originator.
1Source: European Securitisation Forum: A Resource Guide (1999)

G. Forestieri (2009), Corporate & investment banking, Egea, Milano
Editor: Bianca GIANNINI

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