The Process of Securitization WANG Zhenhuan

Definition

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The history

The benefit for banking sector

Originator: loan source bank SPV(Special Purpose Vehicle): separate risks(bankrupt romot) from the bank Credit rating agency: risk assessment (Standard & , Poor's,Moody's) Servicing agency : credit enhancement agency

MBS and ABS Securities backed by mortgage receivables are called mortgage-backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS)

References: Barmat, J. (1990). Securitization: An Overview. In J. Lederman, The Handbook of Asset-Backed Securities (pp. 3-21). New York: New York Institute of Finance. Feeney, P. W. (1995). Securitization: Redefining the Bank. Lodon: MACMILLAN PRESS LTD. Matthews, K., & Thompson, J. (2014). The Economics of Banking. West Sussex: John Wiley ＆Sons Ltd.

Securitization is the open market selling of financial instruments backed by asset cash or asset value.(Barmat, 1990)

In February 1970, the U.S. Department of Housing and Urban Development created the first modern residential mortgage-backed security. The Government National Mortgage Association (GNMA or Ginnie Mae) sold securities backed by a portfolio of mortgage loans.

Introduction The process of securitization The benefit for bank Conclusion

Conclution

Thesis statement

Altougugh securitization could bring some risks for open market, the role of secuitization is necessary for banking sector.

Most risks can be avoided in the process of secutitization There are many positive therefore, securitization plays a significant role in banks

The process

Lower-cost financing Equity saving Matched funding Earnings