Since the 2000s, much has been heard about securitisation, the financial package initially aimed at allowing banks to issue more debts despite the ceilings set by the legislature.
This method, which has actually developed in the United States since the 1970s, has been largely controversial after the famous subprime crisis, which helped make it stand for instability.
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However, in 2017, the European Union wants to relaunch the process, regulating it this time. According to the leaders responsible for this new impetus, this is a way to boost growth by encouraging investment.
However, securitisation is an efficient financial tool provided it is used reasonably. She can by example, allowing companies to get their claims to work in the financial market while reducing risk, as proposed by Coface, a credit insurance reference company.
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Plan de l'article
Securitisation: a tripartite mechanism
As stated above, it was originally the banks that began to securitize their claims in order to push the limit set by the state. In this early form of securitisation, they directly resold these receivables, in the form of bonds, to investors.
Since then, the mechanism has become more complex, bringing into the equation a third larron: Debt, or, in English, the Special Purpose Vehicle (SPV). This intermediary, created ad hoc to carry out the financial arrangement, is responsible for purchasing the receivables from the assignor and then put them back on the market in the form of a bond.
Find a more detailed description of this mechanism in this excellent article.
Investors who acquire these bonds are then remunerated through interest paid to the assignor by the creditors.
One might wonder, then, what is the use of SPVs and why does the assignor not directly resell its receivables to investors?
The benefits of a common debt fund
This is because it would then lose all the benefits of securitisation related to the pooled fund:
- First, securitization allows a risk decorrelation. For the transferor, it is in a few ways a protection. If its debtors are no longer able to repay their credit, and the transferor becomes unable to pay interest to investors, the SPV is responsible.
- Secondly, it is through these mutual funds that allows the issuing body to withdraw these debts from its balance sheet. This has a twofold advantage: improving solvency and complying with regulatory standards.
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Different types of bonds
This mechanism is not a prisoner of a single area, and, theoretically, any type of receivables can do the object of securitisation: commercial receivables, real estate loans, assets…