Illustration: Hit&Run
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The role of the banks in today’s securitization market is very different to what it was in the run-up to the great financial crisis. Banks no longer load assets onto their own balance sheets with a view to securitizing them.
There is no more ‘originate to distribute’, the grand name for the strategy behind so much of the dysfunctional lending that drove the sub-prime residential mortgage-backed securities (RMBS) crisis.
Today banks provide funding to a growing army of private and buy-side institutions that make the loans, and the banks then arrange securitization exits for them.
“We are going back to a model that worked pre-crisis, where banks are no longer the aggregators of assets,” says the global head of securitization at one top five US ABS bank.
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