Securitization: a key link in the financing of the economy.

Summary Securitization is a financial technique that transforms traditional financing into marketable securities placed with investors. It allows banks to refinance themselves and companies to improve their liquidity. This disintermediated financing mechanism is neither dangerous nor toxic in itself. But it is a fact that a deviant use of securitization served as a catalyst for the crisis. The deviations led to a mad rush towards economically aberrant products and a concentration of risks that became impossible to evaluate and locate. Today, securitization is suffering the damage of this lack of confidence. Yet, securitization is a driving force behind the Originate-To-Distribute model widely adopted by banks to meet the demands of their shareholders and regulators. The analysis of this financing method shows that its proper and correctly controlled use (asset quality, transparency and standardization of arrangements) constitutes a key link in the sustainable financing of the economy. The financial industry must face structural changes linked to regulatory developments that fundamentally modify operational mechanisms. The revival of the securitization activity requires an awareness of the merits of this technique. Will all the players - regulators, banks, insurers, companies, investors, rating agencies - be able to grasp this new situation? [Source: 4th cover].