Asset Securitisation

Duration: 2 Days

Programme overview

This Asset Securitisation course provides a thorough overview of this complex market covering the basic structures of RMBS, credit cards and CMBS through to CDOs and the use of synthetic structures and more advanced structured products which have been used in the market.

The programme includes the origination, structuring, pricing and trading of these instruments together with the rating process and an overview of the cashflow modeling of the transactions. It is a complete review of the securitised market to leave you fully prepared for these financial instruments.

Course Objectives

Understand the following key topics

  • the motivation behind the decision to securitise, along with criteria for a suitable receivables pool
  • how to recognise the optimal environment for securitisation, including critical volume and the potential legal, accounting, tax and interest rate constraints
  • how to conduct comprehensive analysis of contracts and systems and to create the right internal environment
  • getting the right instrument for the right market, the available distribution methods, the types of investor and the perception of asset backed securities as an investment
  • the use of multi-seller conduits
  • forms of risk and the available risk management techniques
  • credit enhancement, external and internal sources, and an analysis of credit enhancement decisions in recent deals
  • the rating process and how to manage it
  • the essential legal, accounting and tax issues

Who is the course for

  • International and investment bankers
  • Country and bank risk managers
  • Corporate treasurers
  • Risk analysts
  • Investors and fund managers
  • Financial institution bankers and relationship managers
  • Banking system regulators and supervisory staff


Introduction to the ABS market

  • The history and growth of securitisation in Europe
  • Recent developments and trends in the market
    • who’s issuing what, for whom, and how
    • how the application of securitisation technology is changing
    • public finance transactions
  • Standard deal technology
  • Cashflow versus synthetic structures
  • Range of assets used in securitisation covering RMBS, CMBS, bank loans, project finance loans, credit cards, auto loans, student loans, corporate receivables, whole business securitisation

Review of the players, their contributions and commitments

  • Originator
  • Issuer
  • Arranger
  • Lead manager
  • Credit enhancement providers
  • Legal advisors
  • Trustees
  • Paying agents
  • Reference banks
  • Liquidity provider
  • Guaranteed investment contract provider
  • Servicer
  • SPV management
  • Swap provider
  • Rating agencies

Case Study: Credit card securitisation

Rationale for securitisation: benefits for originator

  • Maintenance of capital requirements
  • Improving the balance sheet
  • Asset / liability management
  • Diversification of funding
  • Credit risk management
  • Reduced cost of funding
    • straightforward savings
    • gains from specialisatio
    • benefits from tradable credit risk
  • Receivables management

Servicing requirements

  • Servicing agreements
  • Third party and back-up servicing
  • The importance of segregating cashflows
  • The importance of managing cashflows
  • Reporting on the performance on securitised assets to investors and credit enhancers
  • Potential benefits from servicing charges

Legal, accounting and tax issues

  • Effectively transferring or assigning the contracts
  • Accounting objectives to be achieved
    • the on or off balance sheet decision
  • Profit extraction

Case study: Residential mortgage backed securitisation

Identification and mitigation of risks for the various parties involved

  • Forms of risk
    • credit risk
    • liquidity risk
    • interest rate risk
    • re-investment risk
    • currency risk
    • market risk
    • reputational risk
  • Risk management techniques available
  • Execution strategy

Credit enhancement

  • Reasons behind credit enhancement
  • External sources with examples
    • guarantees and letters of credit
    • pool insurance
    • monoline insurers: surety bonds
  • Internal sources with examples
    • subordination
    • overcollateralization
    • excess spread
  • Swap providers
  • Interest rate swaps
  • Currency swaps
  • ISDA documentation issues
  • Regulatory issues relating to swaps
  • Counterparty risk issues
  • Using the originator’s own credit standing
  • Choosing the optimum: factors to take into account
    • cost
    • cash and capital constraints
    • investor preferences
    • moral hazard
  • Analysis of credit enhancement decisions in recent deals – the logic behind them and their performance

Case study: a commercial mortgage backed deal

Regulatory issues

  • European regulatory issues
  • Impact of Basle II and Basle III

Overview of the CDO/CLO market

  • Development of the global CDO market
  • European performance of CLO’s over the latest year
  • Identification of the key requirements for a good CLO deal
  • Main drivers for the use of CLO structures
  • Current CLO tranche spreads
  • Impact of defaults in the CLO market
  • Motivations behind CLO deals
    • Balance sheet management
    • Fee income
    • Credit line management
    • Regulatory capital relief
    • Regulatory capital arbitrage
    • Liquidity
    • Product line development

Case study of a typical cashflow CLO structure

Structural issues within cashflow CLO’s

  • Choice of basic structure and collateral
  • Range of collateral types
  • Risk-return characteristics for the originator and investor
  • Credit enhancement techniques for cashflow CLO’s
  • Investment grade CLO’s versus speculative grade
  • Ramp up period and implications
  • Reinvestment and amortisation periods
  • Waterfall structures
  • Collateral manager
    • incentives and performance monitoring
    • management of defaults and recoveries
  • Effect of Basle III on cashflow CLO market
    • minimum capital requirements
    • supervisory review of capital adequacy
  • Analysing the performance of cashflow CLO tranches from an investor’s perspective

Case study of a recent cashflow CLO deals to illustrate structures and objectives

Use of credit derivative structures within CDOs

  • Overview of the credit derivative products used in synthetic CDO’s
    • Default swaps
    • First default swaps
    • Basket swaps
    • Credit linked notes
    • Total return swaps
  • Credit triggers and settlement procedures
  • Infrastructure requirements to run a synthetic CDO
  • Credit events and recoveries
  • The corporate securitisation market
  • objectives of corporate securitisation
  • using receivables as the asset
  • conduit structures
  • credit enhancement for the receivables pool – passive and dynamic
  • whole business securitisation
  • problems in the corporate securitisation market

Case study example of a corporate receivables securitisation

Trainer Profile