Structured Investment Vehicle, SIV (so also said in German, more rarely [unschön] constructed investment instrument)

Generally, a special purpose vehicle that additionally refinances itself by issuing securities with a maturity usually between one and three years. – In particular, also a special purpose vehicle that manages a pool of long-term asset-backed securities (ABSs) whose income is higher than the expenses for the issuance of short-term paper, usually asset-backed securities (ASBs). The conduit company thus enjoys an excess margin, which is the return on the portfolio of its long-term ABSs, minus the expense of servicing the short-term debt taken on by the SVI to finance the portfolio. – In the wake of the financial crisis that followed the subprime crisis, most of the income from the pool of ABSs dried up, while the debt had to be serviced further. This left many SIVs in a precarious position. Originating banks now had to absorb the SIVs they had created, which a number of institutions around the world could barely cope with. (A conduit which is used by financial institutions to generate a profit by – buying a pool of generally medium and long-term asset-backed securities generating in aggregate an excess margin over – the cost of the short-term asset-backed commercial paper issued by the SIV. When the cess margin becomes negative, as a result of the sub-prime crisis, many banks had to directly refinance the conduits they had sponsored. as they were called on their liquidity lines when it became difficult to roll-over the financing in the ABCP market). – Insurance companies in Germany are not allowed to lend to SIVs. – See reintermediation, retransfer clause, shadow banking, subprime crisis, support, tacit, securitization, assets, tied, special purpose vehicle refinancing.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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