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17.0. FI Securitization - Coggle Diagram

- - - - Banks securitize loans
        
        Receiving proceeds
        
        Using proceeds to make more loans
    - - The originating bank or corporation can charge fees for originating the initial transaction that (1) creates the collateral and for (2) selling the collateral to the SPE
    - - Banks removes credit risk from its BL by selling loans to the SPE
        
        Reducing the capital reserves
        
        Allowing the bank to allocate more funds to profitable activities
    - - Banks can use securitization to sell illiquid loan portfolio
        
        Operating more efficiently from a risk/return perspective
  - - - Allowing investos to tailor interest rate and credit risk exposures to suit their specific risk, return, and maturity needs
    - - Allowing investors to gain exposure to private debts without having specialized reources and expertise necessary to provide loan orgination
        
        More efficient and diversified portfolio
    - - ABSs can be sold to other investos more easily than the underlying collateral
        
        Allowing investors to response more quickly to changes in market conditions than they could if they held the loans directly
  - - - (1) It removes the layer between borrowers and investors
        
        reduce the role of the financial intermediary
        
        Reduce the borrowers' cost of fund
    - - (2) Securitize bonds are sold in the public market => more liquid, efficient
        
        (3) It allows investors to have a stronger legal claim on the collateral pool of assets
        
        (4) The greater liquidity of ABSs than the underlyingn collateral allows investors to set equilibrium prices, which makes the market more efficient
    - - (5) ABSs ofer companies an alternative means of raising finance beside bond and equity issuance
        
        (6) Investors can pick and choose the types of ABS that match their risk, return, and maturity porfiles to invest in
    - - (7) Financial intermediaries are able to originate more loans
        (more profitability and reduce leverage for originators)
        
        (8) The increase in the total supply of loanable funs benefits organizations that need loan
- - - - Special purpose entity (SPE)
        
        Asset-backed securities (ABS)
        
        ABS investor
- - - - Extension risk
  - - - SPE may not be able to make cash payments to the security holder
- - - - (3) SPE pay cash for Loans to banks
        
        (4) SPE issue and sell ABS to Investor
        
        (5) Investors pay cash for ABS to SPE
        
        (6) Customers pay periodic payment fo SPE
        
        (7) SPE pay again that periodic payment of custormer to investor
- - - - (1) Independent accountant
      - (2) Lawyers/Attorneys
      - (3) Trustees
      - (4) Underwriters
      - (5) Rating agencies
      - (6) Financial guarantors
  - - - Originator no longer has ownership rights on loans
      - Bán rồi thì coi như nó là tài sản của SPE, ko liên quan gì của bên originator nx
    - - Creditors of Origanitor have no claim on SPE's pool of assets
      - The CF backing the ABS issued by SPE are secure within the SPE
      - The SPE is able to continue to make interest and principal payments to investors using funds generated from the assets
      - The credit rating of the ABSs may be higher than credit ratings of bonds issued by the Originator
        -> Lower cost of funds