1.
SECURITIZATION
1
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2. Securi2za2on
• A
careful
structured
process
where
by
loans
and
other
receivables
are
packaged,
underwritten
and
sold
in
the
form
of
assets
backed
securities.
• Securitization
is
nothing
but
liquifying
assets
comprising
loans
and
receivables
of
an
institution
through
systematic
issuance
of
financial
instruments.
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3. concept
• Securitization
is
mainly
associated
with
the
assets
of
financial
companies.
• The
lending
financial
institution
which
decides
to
go
in
for
securitization
is
called
originator.
• The
concept
of
securitization
is
associated
with
debt
market.
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5. WORKING OF SECURITISATION
Various stages involved in the working of securitization are as
follows:
• Identification stage/process
• Transfer stage/process
• Issue stage/process
• Redemption stage/process
• Credit Rating stage/process
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6. Types
of
securi2za2on
• Pass
through
and
pay
through
certificates
• Preferred
stock
certificates
• Asset
based
commercial
papers
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7. Par2es
to
an
issue
• Originator
• SPV
(special
purpose
vehicle)
• Barrowers
• Investors
• Collection
agent
• Credit
rating
agency
• Merchant
banker
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8. SECURITISABLE
ASSETS
• The
following
assets
are
generally
securitized
by
financial
institution:
• Term
loans
to
financially
reputed
companies
• Receivables
from
Government
Departments
and
Companies
• Credit
card
receivables
• Hire
purchase
loans
like
vehicle
loans
• Lease
Finance
• Mortgage
Loans
etc.
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9. Benefits
of
securi2za2on
• Gains
to
originators
• Gains
to
investors
• Gains
to
borrowers
• General
gains
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10. Benefits
of
securi2za2on
contd…..
• Additional
source
of
fund
• Greater
profitability
• Enhancement
of
capital
adequacy
ratio
• Spreading
of
credit
risk
• Lower
cost
of
funding
• Provision
of
multiple
instruments
• Higher
rate
of
return
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11. Disadvantage
of
securi2za2on
• New
concept
• Heavy
stamp
duty
and
registration
fees
• Difficult
transfer
procedures
• Difficulty
in
assignment
of
Debts
• Absence
of
standardized
loan
documentation
•
inadequate
credit
rating
facilities
• Absence
of
proper
accounting
procedures
• Absence
of
proper
guidelines
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