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Securitisation

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Published: 25th March 2017 by William Webster

Securitisation involves taking assets and using them as collateral for the issuance of bonds. The money raised being used to finance the purchase of the assets involved. In this way banks and building societies can originate loans and use them to obtain funding.

This is a world of “alphabet soup” the nomenclature reflecting the type of asset that has been used. For example, Mortgage Backed Security (MBS), Residential Mortgage Backed Security (RMBS), Commercial Mortgage Backed Security (CMBS), Collateralised Loan Obligation (CLO) and Collateralised Bond Obligation (CBO).

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