carticolarizzazione The sub-prime loans is causing the current financial crisis.
The purpose of securitization (credit) is to allow banks, organizations, companies, financial intermediaries etc.. etc.. to obtain immediate liquidity through the sale of future receivables management company specializing in ( variously known as SPV, SPV, conduit, etc.)
These companies issue bonds to cope with in the purchase and credit flows expected and payable, the SPV will ensure the return of the bonds themselves.
With this technique an economic or financial funds obtained without recourse to the regular credit market. In Anglo-Saxon countries is also called "originate to distribute".
extensive and widespread use of this technique, has determined that the process also referred to as disintermediation, banking, or the process by which the bank itself out processes by supplying money.
In terms of specific monetary policy instruments can have zero-rate financing or even earn (in Italy the future disposal of assets is a consideration, L.130, 1999).
In general the instrument of securitization is used by businesses that have steady streams of revenue: banks: loans, Social Security: contributions, leasing companies: rate, real estate companies: rentals, service companies: water bills, electricity , gas. In some countries, school fees and hospital.
Companies that securitize have the advantage of generating their own streams of funding financial for new investments. However, not all companies can securitize: no known cases of engineering firms, textiles, chemicals etc. etc. using this instrument.
We have thus two different types of companies: cartolarizzanti and cartolarizzanti and therefore we will have two different answers to each intervention on interest rates.
Companies cartolarizzaanti not be totally sensitive to movements in interest rates, because their supply of liquidity continues to be sought through bank credit, while companies cartolarizzanti will have a supply of liquidity insensitive to interest rate movements .
Funding liquidity cartolarizzanti companies do not will be determined by the performance of interest rates, while companies cartolarizzanti liquidity will be determined by the amount of flows of the securitized loans. At the center
nthe process of "originate to distribute are banks and finance companies in their triple function:
1) cartolarizzanti, as their flows constants allow securitization of revenue shares;
2) issuers of bonds, as participants in the specialty management (conduit or SPV)
3) financial market traders of bonds issued by special purpose vehicles, for
own account or for third parties. If
for companies transferring the credits, the relationship with the interest rate is zero for the special purpose vehicle that issuing bonds, the relationship with the trend of interest rates becomes
fundamental and this because of the fact that the profitability of the bonds will be in constant relationship with interest rates, bonds, since they will still have a higher return than government bonds, but the performance may still not be greater than the revenue streams special management in the vehicle. So the optimal condition of the life of a bond with an underlying linked to a process of securitization is that for the duration rates are constant or declining.
The effect of lower interest rates will be to increase the marketability and profitability, back in the face of rising rates, since the remuneration of securities can not go beyond the margins guaranteed by inflows, the issuer may suffer losses due to claims for reimbursement under the waves of selling on the license, poor marketability, and profitability.
This will have at least two consequences. The first is that in the face of rising rates push to increase the spread (the difference) compared to government bonds will push the issuing company to securitize credit classes at higher risk and therefore more profitable. The second consequence is that to protect themselves from the risk of higher interest rates the car companies will resort to other derivatives such as futures, swaps, credit default, expanding and multiplying the systemic risk.
Since the boards of the derivatives are processed in order to enhance the positions most at risk in case of loss they also consume solid margins and non-risky positions.
In some securitization processes, whose underlying assets are solid, a variation on the high interest rates could send the vehicle at a loss not only special but also the same company that securitization. In this case an extension of credit may send in your default sound and solid underlying corresponding to the production of goods, service, a product.
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