Synthetic securitisations
Synthetic securitisations

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Synthetic securitisations
  • What is a securitisation?
  • What is a synthetic securitisation?
  • Market data
  • Why do parties enter into synthetic securitisations?
  • What is the difference between a true sale securitisation and a synthetic securitisation?
  • How do you document a synthetic securitisation?
  • Regulations applicable to synthetic securitisations

BREXIT: The UK is leaving the EU on Exit Day (as defined in the European Union (Withdrawal) Act 2018). This has an impact on this Practice Note. For guidance, see Practice Note: Brexit—impact on finance transactions—Brexit planning and impact—financial services, Brexit—impact on finance transactions—Key issues for securitisation transactions and Brexit—impact on finance transactions—Derivatives and debt capital markets transactions—key SIs.

What is a securitisation?

Securitisation is a technique used to finance the ownership or sale of types of assets that would otherwise be difficult to finance/sell (ie 'illiquid' assets such as bilateral loans and mortgage and other loans to natural persons). In its most common and basic form securitisation is a financing technique that consists in the sale of large pools of such cash-generating assets by a bank or other financial institution (the originator) to a special purpose vehicle (SPV). The SPV pays for the assets by issuing interest-bearing securities (also known as 'bonds' or 'notes') into the capital markets which have the benefit of security over those assets and/or the cashflows generated by them (known as 'receivables'). The cashflows generated by the receivables are used to pay interest and repay principal on the securities, and investors can generally only look to the receivables for repayment. Typically the bonds or notes are divided into different classes. The differing classes (or