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The role of parties in asset securitization

2018-03-04 03:12:00

Overview Asset securitization transactions are more complex and involve more parties. Generally speaking, the following parties play an important role in the securitization process: A. Sponsors. Originators, also known as original owners, are the original owners of the underlying assets of securitization, usually financial institutions or large industrial and commercial enterprises. A special purpose agency or special purpose trustee (SPV). This refers to the institution that accepts the assets transferred by the initiator, or is entrusted by the initiator to hold the assets, and issues securitized products based on the assets. When a particular purpose vehicle or trustee is selected, it is usually required to meet the so-called insolvency isolation condition, that is, it is not affected by the insolvency of the originator. C. Institutions depositing funds and assets. In order to ensure the safety of funds and underlying assets, special purpose institutions usually hire reputable financial institutions for funds and assets. 4. Credit enhancement agencies. Such agencies are charged with upgrading the creditworthiness of securitised products, charging a fee to the purpose vehicle for doing so and being liable for compensation if the securities default. In some securitization transactions, there is no need for external augmentation institutions, but for internal augmentation using methods such as excess collateral. 5. Credit rating agencies. If the securitized product is a bond, it must be rated by a rating agency before it is issued. Pictures of the distributor. An underwriter is an investment bank responsible for designing and underwriting securities. If a securitization transaction involves a large amount of money, an underwriting syndicate may be formed. Securitized product investors, that is, the holders of securitized products after issuance. In addition to the parties mentioned above, securitization transactions may also require financial institutions to act as servicers, who are responsible for day-to-day management of cash flows in the asset pool, usually by the originator.