Actuarial news and views from Cape Town and beyond

Securitisation in SA

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I looked up a few articles on securitization and I picked 2 which I found quite interesting. Securitization is one of the capital management tools mentioned in the notes.
Overview of securitization as a funding tool by SA home Loans
The overview explains why and how SA home loans use securitization as a funding tool. Even though they provide home loans to individuals, they are not a bank and so they needed to find a means to get capital to fund the loans.
The document provides details of the trust that it has set up – this trust guarantees the payment to the lender. It talks through securitization is SA and gives some reasons as to why there have been no defaults in SA unlike the overseas market.
Link to article
Securitization: A conspiracy of Silence by NewERA
Gives an introduction of Securitization in SA, the history of securitization (its starts by giving details of where the idea began), it gives examples of the type of financial instruments that can be securitized and gives an example of the subprime problem in the US.

What I found interesting about this article is the secrecy by banks in SA around which loans are securitized (NEWRA have tried to get securitization information from the different banks with no success), implications thereof if the banks did disclose this information ie they lose all rights to that asset, how this structure affects us the individuals and the “gripes” NewRA has with regards to this structure.

This article made me think that as a user of financial products, there is quite a lot that I need to be more aware of and it also highlighted the importance of regulation and why the regulator needs to release TCF regulations in order to protect consumers as businesses sometimes do not have the needs and interests of the consumer at the forefront.

Link to article


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