securitisation process

It is best explained by an example. Suppose I am a bank and have lots of loans to customers owing to me. I might decide it would be good if I could sell these loans to other people. There is nobody who buy all of them from me, so what I could do is sell ‘shares’ in these total loans so that lots of people could invest smaller amounts and buy a share of these loans. They are not shares in the normal sense of the word, but it is effectively the same. I create securities (the ‘shares’) as a way of selling the asset (the loans).

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