Securitisation: Regulation and practice

Reviled by many for their complexity, securitizations have been squarely blamed by some for the financial crisis while others have seen them as no more than a technology for (a) parceling up risk in pools of exposures and (b) creating liquidity for non-marketed instruments.

This course will provide a balanced presentation to the securitization market with an emphasis on their risk characteristics and how that is reflected in regulatory frameworks. Disagreements about the role of securitizations in the crisis meant that the development of post crisis regulations for this asset class was long and tortuous. The course will explain how official attitudes to the market evolved and what are the implications of the Basel 3 framework for securitization that has emerged.

The course will analyze the broad economic and financial pressures that drive the market. We will examine the role of the ratings agencies in the market and what motivates buy and sell side market participants in using securitization techniques and how this is likely to evolve in the future.

The course will be delivered via a mixture of lectures and practical exercises designed to reinforce participants’ intuitive understanding of securitization exposure characteristics. The practical exercises will make use of simple software tools.

The content of the course will reflect the lecturer’s interests and experience. In the early 2000s, the lecturer worked as a central bank official on the development of Basel II rules for securitization capital. Since the crisis, he has been heavily involved, as an independent expert, in the extensive discussions that have taken place between the industry, regulators and central bankers on how the market should develop and be regulated.