Asset securitisation
Asset securitisation packages assets such as loans or receivables into a financing structure whose securities are supported by the related cash flows. A special-purpose entity may issue securities with different priorities, while servicing, credit enhancement and risk retention depend on the transaction. Assess the quality of underlying assets, legal isolation, fees, timing and the allocation of losses. Securitisation can provide funding and transfer some risk, but an accounting sale or complete risk transfer is not automatic and depends on applicable standards and contractual rights.
Worked example
A lender transfers a pool of loans to a special-purpose vehicle that issues notes to investors. Borrower repayments fund interest and principal under a specified priority; missed payments can affect different note classes differently.
Common mistake
Assuming securitisation makes the underlying loans risk-free or that the originating lender necessarily removes every related asset and risk from its accounts.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Direct | September 2026–June 2027 |