Scrutinization / Securitization
Securitization involves pooling and repackaging of cash-flow producing financial assets into securities that are then sold to investors. The process is performed by a financial institution, which is also typically organized or sponsored by an investment bank or large financial institution.
Securitization also has significant benefits for investors. It widens their choice of available investments. The asset backed securities created by Securitization may also be easier to analyse as investors need only evaluate the cash flows from a small pool of assets, rather than examining complex cash flows across the entire balance sheet of the originator.
Assets are typically sold to a Special Purpose Vehicle (SPV), which is a legal entity established specifically to hold the assets and act as issuer of the notes. The SPV's assets are held for the benefit of the note holders and are segregated from the assets of the originator.
