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Каталог статей из сборников научных конференций и научных журналов- Securitization as an innovative mechanism in the financial market

Securitization as an innovative mechanism in the financial market

J. A. Petrova, Candidate of Philosophical Sciences, assistant professor,

ORCID 0000-0003-1785-4494,

e-mail: julia-pp@yandex.ru,

E. A. Poddubnaya, student,

e-mail: ela_poddubnay@mail.ru,

N. D. Shchetinina, student,

e-mail: shnd98@mail.ru,

Rostov State University of Economics,

Rostov-on-Don, Russia

 

Modern banking institutions are interested in diversifying sources of financing, reducing credit risk and increasing their own liquidity. There are a lot of tools for managing the loan portfolio in order to ensure the financial stability and security of a bank. One of these tools is securitization.

Securitization is a tool for regulating market relations and the movement of loan capital, by means of which credit risk is transferred to third parties by transformation of financial assets into securities in order to improve liquidity and reduce bank's portfolio credit risk. It is the relevance of this issue, as due to securitization security and financial stability of the banking system is ensured [2].

The mechanism of securitization includes several stages:

- The first stage is the sale of the merger of assets, where the initiator together with the organizer of the issue make an audit of the assets on the balance sheet of the initiator. Based on its results, a list of assets that will be involved in the issue of securities is formed, and a deal is being prepared to remove them from the balance sheet of the initiator. The transfer of part of the assets belonging to the initiator takes place after the establishment of a special organization. Such transaction is executed by the purchase/sale agreement.

- The second stage is the issue of securities. This stage covers the preparation for the issue of securities, which are secured by the pledge of assets, and the alienation of their first owners through civil transactions.

- The third stage is payment for the merger of assets. The essence of this stage is that all funds that were collected by the organizer of the issue during the placement of securities are sent to the initiator. For the initiator, these funds are the payment for the assets that were transferred to the organization for a special purpose under the purchase/sale agreement.

- The fourth stage is the collection of funds received from the merger of assets. During this stage, the organizer of the issue defines and forms a contractual relationship with the service organization, according to which it is responsible for the collection and accumulation of funds received for assets on the balance sheet of the organization for a special purpose.

- The fifth stage includes the implementation of payments to investors. At this stage, the service organization distributes the funds received from the consolidation of assets among investors of securities [1].

Nowadays economists distinguish the following types of securitization: traditional, synthetic, securitization of business.

Within the framework of traditional securitization, the requirements of an economic entity are fully sold to a specially created legal entity – SPV (special purpose vehicle). SPV-company subsequently becomes an issuer of debt securities, which payments will be provided by cash flows generated in accordance with the transferred requirements. Particularly classical securitization is the most common in foreign practice, as it helps to reduce the burden on equity, as well as increase the balance sheet liquidity.

Synthetic securitization competes with traditional in the global capital market. Its development was facilitated the growth of the credit derivatives market. Synthetic securitization is structured transactions using credit derivatives to transfer credit risk to a certain set of assets or claims to third parties. In this case, the sale of assets from the balance sheet of the initiator of the transaction does not occur, only the transfer of risks associated with securitized claims, using credit derivatives.

In addition, not only banks and companies, practicing securitization, can benefit but also investors who are looking for modern and effective ways to invest their own funds. For example, one such innovation was related credit notes (CLN – credit linked notes). Investors who do not have transactions using credit derivatives, have the ability to access such market, buying a CLN, they can also expect a higher income on the related loan notes than for conventional debt securities. This difference in yield is due to the fact that investors bear the credit risk not only of the borrower company but also of the CLN Issuer itself [3].

Speaking of global securitization in the banking sector, it should be noted that in European countries the standard structure of securitization transactions differs from American structures. In the US, various types of trusts are used to transfer assets, such as mortgages, and investors directly own a share in the trust. In Europe, this concept is absent. In all transactions, the following structure is used: the owner of the asset sells the assets of a special legal entity that issues securities that will be redeemed by a wide range of investors and secured by assets.

Securitization allows to turn initial liabilities of banks into object of purchase-sale and to provide the solution of the following tasks:

- attraction of long-term liquid resources instead of fixed-term assets by the bank and improvement of the main financial and economic indicators of the bank;

- diversification of financing sources, as well as reduction of credit risk on assets;

- obtaining additional profit by selling the issued securities on the market and investing in more liquid operations;

- improving the bank's reputation [2].

Studying the development of securitization, it can be guided by the experience of established leaders of this market, they are the United States and Western Europe, where for the first time the securitization of assets began to be used to achieve a balance in the financial system. Currently, this innovative financing technique is not yet sufficiently developed, but every year there is an increase in securitization of financial assets and the transformation of the legal framework in this area [4].

As a result of the above, the turn of the XX and XXI centuries is the time of formation of a new innovative mechanism in the financial market, such as a securitization. It allows getting a higher rating of the company involved in the refinancing of the asset, relative to the rating of the borrowing company, and also allows reducing credit risks. In many countries, there is growing interest on the part of banks in the securitization of assets, but this area has great prospects for development.

Bibliography

1. Blazhenkova N. M., Khakimov R. M. Securitization of Bank loans as a new tool of the modern financial market of Russia // Bulletin of UGUES. Science, education, Economics. Series: Economics. – 2013. – № 2 (4). – P. 46–49.

2. Kotova M. V. Securitization as an asset management tool // Proceedings of Odessa Polytechnic University. – 2012. – № 2 (39). – P. 305–308.

3. Malaya E. S. Securitization as a financial innovation in the modern world economy // Bulletin of Moscow University. Series 6: Economics. – 2012. – № 1. – P. 13–19.

4.  Ragimova Z. T. Securitization of financial assets: world experience and prospects in the Russian market // Best scientific article 2016: collection of articles of the winners of the V international scientific and practical competition. – Penza : Publishing house "Science and Education", 2017. – P. 160–164.

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