Loan securitization (loan syndication)

Generally an activity of banks in which – non-tradable assets. such as mortgage receivables or loans to companies, are pooled, – converted into marketable securities (marketable papers) and – sold to investors. Banks usually issue such debt instruments only to globally active institutional investors. They are backed solely by the repayment of loans granted by banks. In this way, the banks transfer the credit risk to other market participants. – Essentially, a distinction is made between – true sale securitization, in which the transferred receivables are no longer shown on the bank’s balance sheet, and – synthetic securitization, in which only the credit risks are passed on, but the credit receivable itself remains on the balance sheet of the bank (the originator; originator). – For the supervisory authorities, this results in an obligation to monitor funds in particular to ensure that they have not overburdened themselves with such risk-bearing assets. This is because banks will be more generous in granting loans if others have to bear the loss of default (moral hazard: an economic subject changes the behavior to lower mindfulness if other parties have to bear potential losses). – See assets, illiquid, asset-backed securities, back-to-originator postulate, credit default swap, credit linked notes, single-originator securitization, good bank, credit derivative, credit extension, credit risk transfer, moral hazard, risk enhancement, subjective, risk transformation, banking, risk-taking rule of thumb, risk taker, setback effect, repayment, early, single master liquidity conduit, subprime crisis, total linked notes, turnover securitization, support, tacit, securitization, securitization paper retention, securities, asset-backed. – Cf. Deutsche Bundesbank Monthly Report of April 2004, p. 29 ff., ECB Monthly Report of September 2005, p. 20 ff. (p. 21 explanatory chart of securitization transactions; p. 22 ff. analysis of the impact of loan securitization on monetary policy; footnotes also provide useful references), BaFin Annual Report 2008, p. 55 (retention rules).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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