Asset securitisation, Managerial Accounting

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The emerging financial scenario has made a fierce competition among the companies to raise funds by innovative financial products by the capital and or money markets. Moreover source of capital can be accessed by securitization, relieving the normal receivable or say deposit collection process for finance banks and companies, without disturbing the liabilities part of the balance sheet. Companies can increase finance and raise their lending activity hence, enhancing profitability.

Meaning:

The term 'Securitization' termed as for both switching away from bank intermediation to direct financing by capital market and or money market and the transformation of a previously illiquid asset as mortgage loans, automobile loans and trade receivables etc., in marketable instruments.

"Securitization is a process of transformation of illiquid asset in security that may be traded later in the open market."

"Securitization is the process of transforming the assets of a lending institution in negotiable instruments."

  • Consortium Lending and Loan Syndication by Banks

As the particular bank finds it complicated to meet the huge financial needs of a borrower, it offers rise to multiple banking that may be in the form of

(i)  Consortium Lending or

(ii) Loan Syndication.


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