Regarding securitization process, some benefits to the banks, who sell securitized assets to SPVs, are suggested by the curriculum such as increasing profitability and efficiency for the banks and that they can lend out more.
However, when selling those securitized assets, don’t banks sell them at present values (which means they give up all of the interests in the future)? If that is the case, are they actually increasing profitability through securitization and what is the point (to the banks) of getting money to lend out more?
Regarding the securitization process, How can we know if our personal loan has been securitized? And in case, if we can not fulfill an obligation, Do we receive presion from our Bank or from SPV directly? Excuse my ignorance in advance…
“Pression” is not a common word in English (I had to add it to the editor here because it thought that it was a misspelling), but that’s OK. We need people to use uncommon words now and again, to remind us how rich our language is.
Banks sell assets to an SPV to isolate these assets from their balance sheet. This way, the investors in the SPV are protected from the bank’s balance sheet. Their only exposure is to the assets of the SPV. This reduces their risk and therefore they are likely to supply capital to the SPV at lower yields than what they would have been willing to offer to the bank directly.
So by securitizing its assets, a bank can lower lower its cost of funding and improve profitability.